London - 16 November 2015: Hedge funds’ diversity and the particular benefits they offer to a variety of investors is highlighted in a new study by the Alternative Investment Management Association (AIMA), the global industry body representing alternative asset managers, and the CAIA Association, the global leader in alternative investment education.
The study, titled ‘Portfolio Transformers: Examining the Role of Hedge Funds as Substitutes and Diversifiers in an Investor Portfolio’, details the specific qualities that different types of hedge funds offer to institutional investors, the main source of capital managed by the hedge fund industry today.
The research is based on a sophisticated “cluster” analysis of the risk and return characteristics of the main hedge fund investment strategies.
The paper says that some of the most experienced investors in alternative investments no longer see hedge funds as a standalone allocation but rather as substitutes for investments in equities and bonds or as investments that bring particular diversification benefits.
The new analysis identifies “substitute” strategies – those that could replace a long-only allocation to stocks, bonds and other asset classes - as long/short equity, long/short credit, event-driven, fixed income arbitrage, convertible arbitrage and emerging markets. “Diversifier” strategies – those that are particularly uncorrelated to the underlying asset class - include global macro, managed futures and equity market-neutral, according to the research.
The paper is the second in a series of publications that AIMA and the CAIA Association are producing for trustees and other institutional investor fiduciaries, an audience traditionally under-served by educational material about hedge funds and other alternative investments.
Jack Inglis, CEO of AIMA, said: “This new paper underlines the heterogeneity of hedge funds today. For every type of fund, there are just as many solutions to investors’ particular requirements.
“The paper also makes it clear that the old distinctions that have underpinned portfolio construction for the last 25 years are disappearing. Pensions, endowments, foundations, insurers and family offices are different entities, with different challenges and divergent investment aims. But what many of them have in common is a wish to see hedge funds as another method of investing in equities, bonds and other asset classes, rather than as a separate asset class. This new thinking promises to transform the risk and return profiles of institutional investor portfolios.”
William J. Kelly, Chief Executive Officer at the CAIA Association, said: "Education is our only product and we are delighted to partner with AIMA on this latest paper. Diversification across multiple asset classes and uncorrelated sources of beta has never been more important, as global equity prices hover near fair value and interest rates remain at or close to zero. Education and informed awareness of any potential solution must be part of this investment process and it is our hope that these papers will continue to add to this understanding."
ENDS
Notes to editors
• ‘Portfolio Transformers: Examining the Role of Hedge Funds as Substitutes and Diversifiers in an Investor Portfolio’ is the second paper published by AIMA in conjunction with the CAIA Association. The first, titled ‘The Way Ahead: Helping Trustees Navigate the Hedge Fund Sector’, set out hedge funds’ core value proposition while objectively discussing some of the challenges that investors face when considering a hedge fund allocation. Both papers can be downloaded from the AIMA website.
• The paper reflects the growth of the hedge fund industry over the last 15 years, which has seen assets under management rise from around $500 billion to around $3 trillion today. Much of this growth has come from institutional investors.
For media enquiries, please contact:
Dominic Tonner, Director, Global Head of Communications, AIMA
Tel: +44 20 7822 8380
Email: dtonner@aima.org
Laura Brooks, Associate, Communications, AIMA
Tel: +44 (0)20 7822 8380
Email: lbrooks@aima.org
Deborah McLean, Managing Director, External Relations, CAIA
Tel: +1 413 253 7373
Email: dmclean@caia.org
About AIMA
The Alternative Investment Management Association (AIMA) has over 1,600 corporate members and over 10,000 individual contacts in over 50 countries. Members include hedge fund managers and other alternative asset managers, fund of funds managers, prime brokers, legal and accounting firms, investors, fund administrators and independent fund directors. AIMA’s manager members collectively manage more than $1.5 trillion in assets. All AIMA members benefit from AIMA’s active influence in policy development, its leadership in industry initiatives, including education and sound practice manuals, and its excellent reputation with regulators worldwide. AIMA is a dynamic organisation that reflects its members’ interests and provides them with a vibrant global network. AIMA is committed to developing industry skills and education standards and is a co-founder of the Chartered Alternative Investment Analyst designation (CAIA) – the industry’s first and only specialised educational standard for alternative investment specialists. For further information, please visit AIMA’s website, www.aima.org.
About the CAIA Association
The CAIA Association is the world leader in alternative investment education, offering the only education pro¬gram uniquely designed for individuals specializing in institutional-quality alternative investments. The Association is best known for the CAIA Charter, an internationally-recognized credential granted upon successful completion of a rigorous two-level exam series, combined with relevant work experience. Earning the CAIA Charter is the gateway to becoming a Member of the CAIA Association, a global network of about 8,000 alternative investment professionals located in more than 80 countries. CAIA also offers the Fundamentals of Alternative Investments Certificate Program (”Fundamentals”), an introductory-level online course, designed to provide a foundation in the core concepts in alternative investing. This program represents a natural extension of CAIA’s mission to provide solutions to specific market needs for alternative investment education.
To learn more about the CAIA Association, contact Deborah McLean (413) 253-7373 or mailto:dmclean@caia.org. For more information on the CAIA Charter, please visit caia.org.
