Bill Kelly, CEO of the Chartered Alternative Investment Analyst (CAIA) Association, examines the pros and cons of alternative investments and how they can be used in client portfolios, including important factors in judging how and when to...
Historically, hedge funds have outperformed during up markets, and protected capital in down markets, but have underperformed over the past 7 years. What then are the realistic expectations investors should have regarding future hedge funds performance relative to stocks and bonds?
Transparency varies by hedge fund investment strategy. At a minimum, investors should understand the primary return drivers and risk factors in each underlying investment, which can be analyzed qualitatively, statistically and operationally.
We provide findings from our survey of 157 single-family offices about their use of private equity funds, hedge funds, and direct private company investments, including recent allocation changes, future plans and differences in behavior across first generation-led family offices and those managed by second generation family members.
Second-generation SFOs have a particular propensity for direct deals, with 71% increasing their direct allocations relative to last year and 82% intending to do so in the future.
90% of SFOs increased their private equity exposure over the past year, either through funds or direct investments.
Both stocks and bonds have several sources of return, which over the long-term provide a reasonable guide to future performance.
As part of our regular survey series, we queried our investor network about their use of alternatives, including current allocations, preferred structures, and top investment strategies of interest.