Hedge funds

FATHEROFTWO_2

What is the current opinion on hedge funds as part of your portfolio?

At present my portfolio consists of
Blackrock absolute alpha
Gartmore European absolute alpha
and
Octopus absolute alpha.
(equal spread)

These hedge/absolute holdings make up 8 percent of my portfolio.


I am considering raising the absolute/hedge fund portion from 8 percent to 15 percent of my portfolio as I think the market will flatline or drop in the next few months.Just my thoughts.

Firstly what would members think is the correct amount to have in a cautious portfolio given the current market conditions?

Thanks

cloud_dog

FATHEROFTWO wrote: »

What is the current opinion on hedge funds as part of your portfolio?

Who knows (sorry to be flippant).

FATHEROFTWO wrote: »

At present my portfolio consists of
Blackrock absolute alpha
Gartmore European absolute alpha
and
Octopus absolute alpha.
(equal spread)

These hedge/absolute holdings make up 8 percent of my portfolio.

I am considering raising the absolute/hedge fund portion from 8 percent to 15 percent of my portfolio as I think the market will flatline or drop in the next few months.Just my thoughts.

Firstly what would members think is the correct amount to have in a cautious portfolio given the current market conditions?

Thanks

Sorry, can't comment on the last question but..... FWIW, I believe over the medium / longer term the general markets (indexes) are going to yo-yo. I would think that an absolute fund would be a good way of gaining returns in this sort of environment.

FATHEROFTWO_2

Thanks cloud dog.

I was looking for answer in relation to percentages of hedge funds in a portfolio in this current climate.

Does anyone have hedge in there portfolio and what percentage is it?

turbobob

I've currently got some cash in Blackrock's UK Absolute Alpha and Threadneedles Absolute Return Bond funds. They are about 15% of what I've got earmarked for longer term investment. It was a higher percentage last year.

I will own up to investing in the Arch Cru fund in the past but sold it on a gut feeling early this year.. It turned out to be a good decision as the last I checked it's future is uncertain. The investments it apparently held were illiquid and it was unable meet redemption requests. No-one really understood how it worked. I think this highlights how you should do your research and check you understand how a fund works before you invest in it!

Stavros_3

Bump,

I too are interested in the O.P's comments re hedge funds, are there any constructive comments, maybe DustonH may have a view, thanks

FATHEROFTWO_2

I too would be interested in Dunstons opinion.

I know that normal balanced risk portfolios are out the window as the investment fund market has changed so much over the past 12 months that the rule book has been torn up and no one without expert knowledge (even they guys are struggling).

I would be interested in what a number of investors are investing in and in particular what there portfolio allocation to hedge/absolute funds at this moment

Stavros_3

Bump - again, DunstonH, any chance of your respected oppinions, ta

dunstonh

I'm not particularly fussed with absolute funds. They smack a bit of flavour of the month. What is often referred to as fashion investing.

That doesnt mean they should necessarily be avoided but its all too easy to get sucked in with fashion investing and go too heavy on your allocation.

If I was using them, they would really have to form part of my specialist sector allocation and that really means no more than 8%. I wouldnt want to break the allocation by going higher.

They have been pretty good on the whole when things go down but pretty awful when things go up. Short term may make them look attractive but longer term could see them getting left behind when you look at the net effect of the ups and downs over a longer period. If they get the hedge right then it will look good. If they get the hedge wrong, it will look bad. Its really just another investment strategy that will have periods when it does well and periods when it doesnt.

I will own up to investing in the Arch Cru fund in the past but sold it on a gut feeling early this year.. It turned out to be a good decision as the last I checked it's future is uncertain. The investments it apparently held were illiquid and it was unable meet redemption requests. No-one really understood how it worked. I think this highlights how you should do your research and check you understand how a fund works before you invest in it!

I remember posting on this board long before Arch Cru was suspended that it should be avoided. So, I can make claim to not saying that with hindsight. If you dont know the content of the fund then you shouldnt invest in it. Especially if it is doing something that is completely the opposite of the market.

purch

Absolute Return Funds shouldn't be confused with Hedge Funds.

They are two totally different things.

They also shouldn't be considered cautious or low risk.

They can be a good diversification tool in your portfolio, but should be judged in the same way as any other fund, that is in return.

Looking at the Blackrock fund, which is probably the best known and most popular I wouldn't call the returns particularly spectacular, probably about 5% over the last 18 months or so.

Whilst it missed out on making large losses during the market collapse, it hasn't made much as the market recovered either.

I realise that is the whole point of these Funds, but I can think of other ways to avoid losing when the market falls, and make far more when the market rises.

Jonbvn

purch wrote: »

....but I can think of other ways to avoid losing when the market falls, and make far more when the market rises.

Care to reveal them for us amateurs?

The_White_Horse

i don't know why people bother with these funds. overall, you're probably better off with a savings account.