That hedge funds are going retail is also born out by Swiss private bank Julius Bär’s plans to launch a Luxembourg retail absolute return fund, although it will be missing one or two sexy features such as leverage and foreign exchange positions.
To take the view that when granny buys hedge funds, it’s time to sell would be rather drastic but the story does illustrate the huge impact the world’s 6000 hedge funds are having on the capital markets.
Fixed income investors know these days that if a bond is volatile without explanation it’s usually part of a hedge fund play.
Pension funds can find themselves on the wrong end of this with little or nowhere to go if their rules forbid them from going short or investing in hedge funds.
So granny is getting a bad deal on her pension fund as a result but switching her savings into watered-down hedge funds for retail may not help much. Julius Bär’s return target for its retail fund is a mere Libor plus 3%.
But even fully sexed hedge funds are going to struggle to find new opportunities with so many on the trail. “My concern is that with such strong growth in the hedge fund world it starts to become a consensus trade,” says Ronny Beck, first vice president of Julius Bär Investments, which has notched up stellar performance with its institutional hedge fund started in 2002.
In which case whither the smart investor? Spec funds? Bush funds?
Brian Caplen
