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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

  • 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.

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.

MAKING AN INFORMED DECISION
ABOUT INVESTING IN HEDGE FUNDS

Background

A family office has investments in real estate and marketable securities. The investment manager would like to evaluate whether hedge funds would effectively contribute to the diversification and performance of their overall portfolio.

Problem

  • The family office has no deep experience in hedge funds, but would like to do the evaluation on their own while getting up to speed about hedge funds.

  • The family office would also like to perform simulations around building portfolios of hedge funds based on their own criteria and analyze and compare results, in order to determine whether to invest in hedge funds.

SOLUTION

  • The investment manager uses HedgeSight to learn about any one of the 6,000+ funds in the database including where the fund is domiciled, the fund principals and contact information, the fund service providers, the fund currency, investment strategy, AUM and track record.

  • The manager checks an analysis of the best performing strategies in any past period of time to identify compelling strategies that have worked well in the past under different circumstances.

  • The manager then creates and compares scenarios of constructing hedge fund portfolios using a set of requirements around investment strategies and correlation with the equities markets. This in turn is used to determine whether certain best performing strategies exist that would also effectively diversify their overall portfolio.

BENEFITS

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

  • HedgeSight’s rich set of capabilities provides an effective learning environment for a family office to get up to speed on hedge funds, build optimal portfolios, and evaluate hedge fund portfolio performance and risk exposures.

  • Such an effort helps the family office make an informed decision on whether hedge funds are an asset class to be considered and added to other asset classes for improved overall portfolio performance and diversification.

PROVIDING ANALYSTS WITH
A HEDGE FUND TRAINING PLATFORM

Background

A sovereign wealth fund would like to set up an on-going internal program to train analysts and new hires in hedge fund portfolio analytics. Trainees would have to be acquainted with hedge funds worldwide, be able to construct optimal portfolios and analyze portfolio risk exposures.

Problem

  • Current investment managers have no time to train other employees.

  • The fund has no internal independent platform suitable for training purposes that incorporates relevant information on a large set of global hedge funds along with a full set of integrated analytics.

SOLUTION

  • Using HedgeSight’s train the trainer program the sovereign wealth fund builds the required internal portfolio analytics training program.

  • Trainees learn about thousands of hedge funds worldwide including fund domicile, currency, investment strategy, AUM and track record.

  • Trainees are then able to build optimal portfolios based on a set of criteria, perform portfolio risk exposure analysis, create various what-if scenarios and evaluate third-party recommendations.

BENEFITS

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

  • HedgeSight’s rich set of capabilities provides a comprehensive hedge fund quant training and a scalable environment for sovereign wealth funds and large institutions.

  • HedgeSight’s rich set of capabilities provides a comprehensive hedge fund quant training and a scalable environment for sovereign wealth funds and large institutions.

  • Trainees get up to speed quickly on their knowledge of hedge funds and related analytics including portfolio construction and portfolio risk exposure analysis.