|
|
 |
Strength
in Diversity ? April 2003
Global
Asset Management's $3.3 billion fund of hedge funds sets the standards
for its rivals in the sector. But, Nigel Davies wonders, does the
time ever come when a fund is too big?
Shrouded in a dark veil of obscurities
and grey areas, hedge funds are often a no-go area for investors worried
about the uncertainties of returns and the management of their capital.
Yet for an experienced investor willing to come to grips with the
complexities of such funds, they can often be irresistible.
GAM’s flagship $3.3 billion Diversity fund of hedge funds, launched
in 1989, is one of the longest standing and has managed since its
inception to boast positive gains over all its time and an annual
growth rate of 12.96 per cent.
The fund aims to act as part of a wealthy investor’s wider portfolio,
hoping to reduce its volatility and increase returns. So far, so good
for the fund, as returns even in injury struck 2002 have been at 3.42
per cent, and an annualised deviation of 9.38 per cent against the
MSCI’s World’s annualised standard deviation of 15.24
per cent has also been registered.
The Diversity fund has recently launched new sterling and euro classes,
which it hopes will appeal to UK pension funds and European investors.
Although this may not hugely increase the number of investors joining
the fund, it offers, especially, in the sterling class offering, something
that most fund of hedge funds do not.
David Smith, chief investment director of GAM’s multi-manager
team believes that one reason behind its success is just how clear
it is for investors to understand.
" People are often surprised by how transparent we are about
the fund’s performance (the fund offers weekly and monthly reports)
and this is largely because of GAM’s private client background.
Investors can check exactly where their investment is going and what
the managers of funds are doing with it.”
Alongside the fund’s transparency, the fund also offers weekly
subscriptions and monthly redemptions with a minimum investment of
$5,000. “This is the most liquid hedge fund you’ll ever
come across,” says Smith. The fund has an annual fee of 1.76
per cent.
The fund is well supported by having a large global research team
who look to find the best fund managers around.
Chris Cole, private clients investment manager at Chase deVere, a
reputable UK financial adviser, says: “There is a real diversity
to its fund managers and as the fund has been around and performed
well over the years it is able to access some fund managers who have
closed to other investors.”
Other funds, Cole says, would not be recommended by Chase as “if
they have no track record, they wouldn’t even make the radar
screen. Hedge funds can be opaque, but GAM’s transparency and
the fact that is owned by UBS give comfort to investors”.
However, Cole stresses that people must understand these complex funds
before they recommend them to any investors. “Before anyone
is considered for this type of fund we make sure that they know about
the history of hedge funds and that they perform differently to other
funds.”
The only mild criticism levelled at the fund seems to be its vast
size. Cole says: “That is a concern as GAM is now managing a
huge fund, that could prove tricky. However, given depth in data and
experience we would keep on recommending it to clients.”
Smith has managed the fund for six years now and rigorous checks on
all fund managers have ensured that customers feel at ease with its
operations. Yet, sultimately he will always be judged on its returns.
“My objective is to make money for client every year and so
far that has been fulfilled.”
Long may it continue.
|
|
|
|
