Can hedge fund managers create a magic bullet?
By Angus Foote | 12:57:57 | 28 July 2009
When Europe’s leading fund selectors all start getting excited about a new product trend, naturally I hope they’re on the right track. But what if they’re wrong?
In Zurich, Geneva and Milan in the last few weeks, selectors have been telling me that hedge funds launching Ucits III products will be the next big thing.
Big-name hedge funds have been doing the rounds talking about their plans. So how many have products in the pipeline? A leading selector in Geneva told me they had heard from ‘five or six’. A Zurich-based buyer said 20. In Milan, I was told simply: ‘It’s all the hedge funds.’
It sounds a great idea. Lots of selectors have been yearning for access to all the talent in the hedge fund sector, especially after so many top-performing long only managers moved across at the height of the bull market. Selectors want hedge fund strategies, and absolute return, but they need a safety net. The Ucits III wrapper could be the perfect solution.
But consider the following statement: ‘The idea is wonderful – when I heard it first, I thought that’s the Holy Grail. But it didn’t work. Why? I don’t know. In most cases, it was just marketing.’ This is a Zurich-based fund selector talking about 130/30 funds, which he described as ‘a big disappointment.’
Of course many 130/30 funds were launched by long-only providers, and the most common criticism I’ve heard is that managers didn’t really know how to run the short side. I would hope this wouldn’t be a problem for hedge fund managers running these new Ucits III products.
But, remembering the buzz that surrounded the 130/30 concept, it seems possible we could see a similar cycle of enthusiasm and disappointment. I’m afraid I don’t really believe in magic bullets or Holy Grails, do you?

Advertisements