Managed Futures/Hedgefunds

GoodWork

Hi,
I am looking to invest some of my pension into Managed futures and Hedge Funds. Does anyone
have experience of doing this in the U.K please ? For example I am looking at Dunn WMA, Milburn Multi markets program and AHL Evolution.
Any suggestions of a low cost SIPP provider would be much appreciated.
Also any websites or magazine suggestions to read, would be appreciated.
Many thanks.

grey_gym_sock

Gary_Miles wrote: »

I am looking to invest some of my pension into Managed futures and Hedge Funds.

why? (that's 2 questions: why managed futures? and why hedge funds?)

GoodWork

I like the idea of diversified investments as opposed to the traditional long only shares. I'm getting nervous about investing in 2 asset classes (shares and bonds). I'm thinking trend following in many asset classes may offer better long term returns. If people think it's a bad idea, I'm happy to hear their opinion.
Thanks.

Drp8713

If you want more diversification, I would look at adding Property, Commodities, Private Equity, Infrastructure, before going down alterative routes.

grey_gym_sock

IMHO, it's fair enough to consider possible diversifiers beyond shares + bonds. but many things touted as such don't really add anything useful to simpler portfolio. and they also can be very expensive.

hedge funds i would dismiss outright as a category. the name suggests something market-neutral, but in practice many of them are not, and they can be run with very disparate strategies. some of which are probably decent strategies. but all hedge funds have in common is an excessive charging structure. which will almost certainly more than wipe out the advantages of following a decent strategy. and you won't have access to the best-regarded (or second-best-, or third-) hedge funds anyway. so why even look for something here?

managed futures? presumably you mean with a trend-following strategy. there is a lot of evidence that trend-following (a.k.a. momentum) can work in many different kinds of markets. so in theory i think that could make sense for a small part of a portfolio. i'd want clear info about what methodology the manager is using, not a completely open remit. as well as charges not being excessive. i don't know if there's anything meeting those criteria available in the UK. (there's more such things in the US, e.g. some ETFs from AQR might be worth looking into - except that it's probably impossible to buy US ETFs now.)

overall, i'd say decent diversifiers are difficult to find. and better not to use them than to pick a half-arsed one. if you're nervous about markets, you could hold more cash or (high-quality, short-term) bonds.

AnotherJoe

This is one of those "if you need to ask you shouldn't do it" questions.

bostonerimus

I'm with the other posters....why are you looking at hedge funds and managed futures? What are you trying to achieve that a sensible equity and fixed income portfolio can't provide.

If you want some diversification you could look at direct property investments by buying a rental flat or REITs or some commodities funds.

Stirfry

AnotherJoe wrote: »

This is one of those "if you need to ask you shouldn't do it" questions.

Have been considering First State Global Listed Infrastructure Class B Inc Hedged, and would like to ask the question (even if I shouldn't). Would I be better off taking a different class in this fund, it appears the charges are similar? I am thinking that having one Hedged fund while holding something in infrastructure might be worthwhile.
To Hedge of not to Hedge?

AnotherJoe

IMO hedging is a waste of time long term, because you can only hold back the tide of falling sterling exchange rates for a short period, and worse, you are paying a premium for that which will reduce the overall performance for literally no gain. Or if sterling rises long term, you've diminished your return doubly.



So, back to "if you need to ask", what is it you think you are gaining by hedging ? If for example the Pound falls from 1.40 to 1.10 dollars over the next 10 years for example, that's not something you can usefully hedge against.

grey_gym_sock

the general rule is: don't hedge equities, or infrastructure, or any other real assets. before costs, hedging could equally gain or lose you money. but it has costs, which add up over time.

the case that's probably different is for non-sterling bonds, or other assets denominated in a currency other than sterling. because bonds are usually intended as the steady part of a portfolio, and they become a lot more volatile if they include exposure to currency fluctuations. so there is a reason you might be prepared to pay the cost of hedging here.