Hedge fund investors are quickly realizing that simply allocating to managers that have performed well over the last couple of years is not necessarily an investment strategy for the long-term.  Some of the “top performing” funds of the past several years have experienced record drawdown during the last several months. Many have even shut their doors as redemption requests coupled with substantial declines have forced their hands.

Does this mean that investing in hedge funds was simply a fad? I don’t think so. What this means is that investors will now focus even more on multi-manager portfolios than single manager allocations. 

However, not all multi-manager portfolios are alike.  The manager selection should go beyond correlation and other statistical measures. While these quantitative measures are valid, it is clear that they become skewed during uncommon market conditions.

There will most likely be a greater focus on diversifying among managers that differ on trading strategies, trading time frames, markets traded, whether they are systematic or discretionary traders, risk taken per trade, and more.  You will also continue to see a greater focus on transparency and more frequent liquidity.

Balarie Capital Management realizes that institutions and individuals have different investment profiles, risk requirements, and investment policy mandates. As a result, we shy away from cookie-cutter investment recommendations and implement a more consultative approach. Our financial and operational integrity, combined with access to over 400 Commodity Trading Advisors, allow us to create and monitor custom portfolios that meet your investment needs.

Balarie Capital Management works with Pensions, Endowments, and Insitiutional Investors regarding their commodities and managed futures investments. Please contact us or access our managed futures database for more information.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.  THERE IS SIGNIFICANT RISK OF LOSS WHEN TRADING FUTURES AND OPTIONS. ALWAYS REVIEW A DISCLOSURE DOCUMENT BEFORE INVESTING IN ANY MANAGED FUTURES PROGRAM.