Hedge Fund Investors
Benchmark replication portfolios are designed to supplement active manager selection, not eliminate it. A selection of individual managers is a highly involved, research-intensive process which takes time and resources. An investable benchmark is a low-cost solution that provides instant diversification and exposure to managers who otherwise may not have been included in the portfolio because of liquidity, minimum investment, or other constraints.
Investors without Hedge Fund Exposure
Replication of a portfolio of best hedge fund managers offers an ideal solution to qualified investors who do not currently have an opportunity to actively select individual hedge fund managers. It eliminates the requirements for complex due diligence, sourcing and monitoring of individual managers. This is a “turn key” solution to obtain exposure to a diversified portfolio of high quality hedge fund managers, at low cost and improved liquidity.
Many sophisticated institutions are no longer content with the lack of transparency, low liquidity, and high fees associated with hedge funds. Often, performance doesn’t justify these problems. Investing in the replication portfolio addresses these concerns. It is not designed to replace active manager selection, but offers a solution for quick deployment in the asset class with better liquidity, low fees, and without capacity constraints.
Chronic low interest rates are making it difficult for insurance companies to meet their return targets. Many insurance companies became active hedge fund investors in their search for higher returns and low correlation. However, limited transparency and liquidity has precluded them from dedicating a substantial portion of their portfolios to such investments. Benchmark replication addresses these concerns in a low-cost, one-stop solution.
High Net Worth Individuals & Family Offices
A typical HNW hedge fund portfolio may consist of several attractive funds. It is rare that a HNW or a mid-size family office can assemble a portfolio of many institutional quality managers. Replication of top hedge funds in a single portfolio provides an opportunity to do so with a very low minimum investment, low cost, and high liquidity.