WEST PALM BEACH, FL (www.hedgeco.net) – UK-based Attica Alternative Investments said that hedge funds are as safe as government bonds if well-diversified. Such instruments could also yield similarreturns as those from government bonds. Attica’s chief investment officer, Jaakko Karki, told Reuters news that hedge fund strategies which use a variety of strategies for risk diversification couldalso be compared to investment-grade fixed income instruments.
Karki said, “The risk and return aspects of a fund of hedge funds compared with bond portfolios are very similar . They are also very similar to capital preservation-focused funds however, although returns are similar, they are independent.” He added, “Over the last 15 years, the correlation of monthly returns between a government bond portfolio and a multistrategy fund of funds has been around zero.”
Karki also said, �That during a 15 year period, multistrategy hedge funds were able to preserve investor assets and capital with little losses.� Some of those years according to him included bear market period. The comparism of hedge funds to government bonds is particularly true for long/short equity hedge funds Karki explained.
Karki also said, “Long-only equity portfolios went through periods of exuberance such as the technology boom in the late 1990s when they generated double-digit returns, or periods like the 2000-2002 crash when investors experienced losses of 40 to 90 percent.� Their constraint according to him is their inability to apply effective risk management tools in their endeavors.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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