WEST PALM BEACH, FL (HedgeCo.Net) – Traditional fund managers continue to utilize hedge fund type strategies according to Alex Ineichen, UBS’s head of alternative investment strategies. According toMr. Ineichen, such trend was the consequence of the bear market that resulted from the meltdown in the equity markets.
Mutual funds generally take long positions in the markets, profiting from rising stock prices. However, such strategies were not as profitable as they have been in the past, leading to significant losses recorded by many mutual fund managers.
Ineichen said, “That time was a catalyst for rethinking risk; tracking a benchmark means you are tracking its risk. The probability of underperformance rises as a manager moves away from the benchmark.�
Ineichen also said, “Risk management has to be active to avoid large swings on the downside … That’s what hedge funds do. Risk management protects wealth, the paradox is that traditional asset managers look for talent and then put constraints on it. (But) some traditional managers have started to use derivatives, it’s a trend.”
Some market watchers think it is a bad idea when mutual fund managers apply hedge fund trading strategies from the same roof. Such views worry about potential conflict of interest that may result from such situation. Nothing stops traditional mutual fund money managers from quitting such arena in favor of hedge fund management. As a matter of fact increasing number of traditional money managers continue to cross over to the arena of hedge fund management. If current difficult market conditions continue, expect a lot more mutual fund managers to venture into hedge fund management.
Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net
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