BUILDING A CORE COMPETENCY IN HEDGE FUNDS

BACKGROUND

A reputable small asset management firm provides global investment advisory services to institutional and high net worth individuals. The clients typically require their investments to be diversified among various asset classes including marketable securities, real estate, private equity and hedge funds. The firm has deep expertise in a number of asset classes but not in hedge funds. In order to support its hedge fund advisory practice, the firm uses its own research from hedge fund data sources as well as recommendations from other major sell side institutions and research firms.

PROBLEM

PROBLEM

  • The firm cannot easily validate whether recommended hedge funds added to a client investment portfolio would align with their client specific investment objectives.
  • Furthermore, the firm has no way to easily assess the correlations between the client’s existing portfolios and a group of recommended hedge funds.
  • Finally, the firm has no way to fully describe in an objective way why certain funds were selected in the client’s portfolio, and what their potential impact will be.

SOLUTION

  • HedgeSight provides the ability to specify the investment requirements for each client and construct optimal hedge fund portfolios in full alignment with the client specific requirements including risk preferences, risk-adjusted return objectives, cash flow, investment terms and fees and diversification requirements.
  • Each third-party recommendation is evaluated in terms of alignment with client investment requirements. If aligned, it could be part of an optimal portfolio construction.
  • Asset managers can view and share with clients the step-by-step process of constructing a portfolio and validating how the portfolio meets the requirements.
SOLUTION

BENEFITS

The solution provides a number of benefits to the firm including the following:

  • Improve the firm’s core competency in hedge funds including the ability to sift through 6,000+ hedge funds globally as well as a variety of recommended funds and build a portfolio that best aligns with each client investment objectives. 
  • Save valuable time and effort by leveraging HedgeSight’s advanced analytics and integrated process to identify the funds to pursue.
  • Increase client loyalty to the firm and confidence in its decisions by providing a complete transparency around the decisions made about the construction of their portfolios.