Absolute Return Portfolio Construction

The funds chosen for each of the Alternative Portfolios have historically proven themselves in all market conditions and have generated positive returns for our clients despite the bear markets of recent years. Unlike mutual funds, which focus on their exposure to specific markets, these hedge funds can adopt strategies to suit current market conditions, or select a more appropriate area to move into.

“Hedge Funds” are an important asset class for high net worth individuals, pension funds and institutional investors. At end of 2007, the total asset under hedge fund management around the globe was US$2.5 trillion. The primary aim of hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions. Hedge fund portfolios have exhibited a low correlation with traditional asset classes, suggesting that hedge funds can play an important role in strategic allocation.

These funds are also known as absolute return strategies or funds and register real returns, not relative returns such as mutual funds. Mutual funds performances are usually benchmarked to some common indices. As long as the fund performs relatively better than the index, be it positive or negative returns, the manager has done well.

Your choice of funds should ultimately be based on your tolerance to risk, your expected time frame, and the rate at which you wish your investment to grow.

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