“Correlations are very likely to betray you because they give you as false sense of security,” argues Reisbol. “In times of stress correlations become extremely unstable. When you need diversification benefits the most, they disappear.”
“During the Lehman crisis, hedge funds all showed the same characteristics. They all went from low volatility and low correlation to negative returns, high volatility and high correlation. When you needed these instruments the most as portfolio diversifiers in 2008/2009 they didn’t actually do their job.”
However, Frank Reisbol still invests in alternative Ucits funds on the request of his clients. In part two of this video interview, Reisbol explains what an alternative Ucits strategy should do to pass his strict litmus test.
Click here to watch part two of the video interview, in which Frank Reisbol reveals what test an alternative Ucits fund should come through to be eligible for selection.
