Posted inAbsolute ReturnAlternatives

Alternative fund buyers prioritise drawdown

Almost half of the delegates said they find the maximum drawdown of a long-short fund the most [image_library_tag dda9d6df-cf2d-4fab-948c-628211c2b981 150×100 ” style=”width: 150px; height: 100px; float: right; margin: 10px;” title=”France-Enguehard,-Stephane280.jpg” ]important performance metric. “I don’t find it surprising that maximum drawdown gets most votes, because a lot of fund selectors present here have a fiduciary duty to protect capital for their investors”, said Stephane Enguehard (pictured), who manages a fund of hedge funds for Lyxor Asset Management. A crowd composed of a sample of long-only fund selectors would probably indeed have prioritised return and volatility over drawdown.

Return came in only second, with 37% of delegates finding it the most relevant criterion. Volatility closed the ranks collecting 18% of the votes.

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In need for negative fixed income duration

In order to achieve this minimum drawdown, and a so-called absolute return each calendar year, diversification in terms of strategies and asset allocation is key. But 80% of fund selectors attending last week’s Congress have had to cope with at least some resistance in implementing alternative strategies, a poll showed.

They also feel an urgent need to anticipate on the record-low yields in almost all fixed income categories, with alternative bond funds being the most popular alternative strategies for the moment. “We have some high quality long-duration exposure. But it is important for us to find solutions to implement negative duration strategies. Reducing duration is critical right now,” said Omar Gadsby, head of fixed income fund selection for Credit Suisse’s private banking arm.

 

 

 

Part of the Bonhill Group.