Hedge Funds Review Magazine- Investors are being unsuspectingly exposed to long-bias portfolios or high-beta strategies, according to the managers at Cartesian Capital, the Edinburgh-based investment boutique.
They believe many managers simply use index futures as the ‘short’ element of their portfolios and can consequently under-perform when markets come under pressure.
“Index shorts can be initiated quickly but end results may not be desirable,†said Andrew Kelly, lead manager of the Resolution Cartesian UK Equity Long/Short fund. “If the underlying long portfolio is mid-cap biased then shorting a large-cap index may not provide protection, as demonstrated in September when the UK mid-cap index fell 2.4% while the FTSE rose 2.6%. Stock picking shorts requires a higher degree of diligence but ultimately provides a better quality hedge and potentially a higher degree of reward.â€Â
Kelly believes that many investors will have been unpleasantly surprised by the poor performance of their hedge fund during recent market volatility, and said hedge funds are failing investors.
