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global hedge funds

Discussion in 'Managed Funds & Index Funds' started by jabanico, 6th Dec, 2010.

  1. jabanico

    jabanico Member

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    Hi.

    I have recently moved to Australia and am selecting managed funds to invest in for my Super. I have chosen a couple of managed funds based on the criteria of performance during and after the GFC, and both turned out to be managed futures hedge funds.

    Man AHL Diversified - Man AHL Diversified (AUD) - Managed Fund Profile

    Winton Global Alpha - Winton Global Alpha Fund - Managed Fund Profile

    These funds use system trading in over 100 futures markets and their performance don't correlate to any traditional investment funds.

    I'd like to ask if this is a sound strategy or should I instead go for a mix of equity funds as well?

    I understand that during bull markets, equity funds perform best. However, since I do not trust my own market timing sense yet, I have chosen these funds since they have the ability to go long/short depending on the trend.

    Thanks.
     
  2. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Hedge funds usually have high fees. If they have good returns and are not correlated to any market, I can see a small place in a portfolio for them.








    Johny.
     
    Last edited by a moderator: 6th Dec, 2010
  3. jabanico

    jabanico Member

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    Thanks for your reply.

    This may be for another topic, but do fees have greater weight than performance when selecting a fund?

    I used to look at index funds but it seems to me that the fees matter less when actively managed funds are able to compensate for it.
     
  4. Johny_come_lately

    Johny_come_lately Well-Known Member

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    Look at it this way. Say you could get a 10% return on a market. Most managed funds don't beat the market. Now, say your fees on a MF = 2.5% and an ETF = 0.25%. That means your fund manager has to take 2.25% more risk just to Equal the market. If we could magically pick the fund manager who would always beat the market, thats great. But I can't. So I choose low fee funds.




    Johny. :)
     
  5. Johny_come_lately

    Johny_come_lately Well-Known Member

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    I had a long/short fund for a while. When they banned short selling during the GFC all the hot money screamed out and it crashed and burned. Who can tell what legislation can effect future earnings!

    And the performance fees were horrific.






    Johny.
     
  6. jabanico

    jabanico Member

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    I use investsmart.com.au to choose funds, and the performance figures quoted already have ongoing fees factored in.

    Since I got to these chosen funds with the criteria of performance during the GFC and after, I'd like to ask then whether that criteria itself is sound.

    For managed funds to invest my Super in, should I:

    1. Choose funds that perform well on bull and bear markets (usually long/short hedge funds)? (The drawback here are high fees, but in a bear market, I feel its worth its price.)

    2. Do market timing on more traditional funds? (I have to acquire long-term market timing skills for this approach to be effective.)

    3. Rely on asset allocation? (The recent GFC has taught me that sometimes all asset classes suffer in a down market so this might not work for me.)
     
  7. jabanico

    jabanico Member

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    I didn't know that. The funds I'm looking at did quite well, so they might have not been affected by legislation. By the way, those are international hedge funds so if the ban was specifically for ASX, they probably weren't affected.
     
  8. Johny_come_lately

    Johny_come_lately Well-Known Member

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    You are right, that when a 9/11 or GFC happens, all asset classes tend to tank. But what about the rest of the time.

    Market timing is always a tricky one. I can't predict the future.

    Can you drive a car just by looking in a rear veiw mirror? Can you pick a fund just by looking at past performances?

    What balance best fits you?






    Johny.
     
  9. Johny_come_lately

    Johny_come_lately Well-Known Member

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    If you ever go to the street markets, you will see a lot of cheap imports being sold. The vendors usually have a large selection of goods. They sell things like sunglasses and umbrellas. They know that if it rains, the umbrellas will sell and if its bright, the sunglasses will sell.

    So in a balanced portfolio, you will have your down funds and your up funds. The more uncorrelated/ negitively correlated asset classes you can get, the lower the risk.





    Johny.
     
  10. jabanico

    jabanico Member

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    This is for my Super and I'm 30 years away from retirement, so I can afford to have higher risk in my portfolio.

    I'd say my selection is based on the preference of investment style. If I were to use performance alone, I'd be lost. For any selected period, a different asset type comes out on top - commodities, small cap, etc.

    These funds, on the other hand, claim to invest in many types of markets ranging from currency to commodities and fixed interest, but take a big chunk of the profit (20%).

    It's a very narrow strategy (if you can call it that), but it is something that I can easily follow.
     
  11. Johny_come_lately

    Johny_come_lately Well-Known Member

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  12. jabanico

    jabanico Member

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    Thanks. It is System trading so it is more like trusting the management of the software / system than any person. I guess if I'll take this path I'll just have to follow news regarding the organization.

    I'm checking CompareFunds now. The tricky part is how much to factor in performance during the GFC year (Last 3 Years) against the rest. The GFC was a game changer, and we don't know how long it will take before it happens again. I tend to think that it is going to happen more frequently from now on, and looking at longer year figures (Last 5/7/10 Years) will only bring more of the pre-GFC bullish years into the picture, which may not apply as much anymore.