Veteran hedge fund of funds’ manager Dixon Boardman, CEO and Founder of Optima Fund Management, has commented on how hedge funds have performed in the recent volatile market.
He says: “First, the recent downdraft in equities is a long-overdue correction that helps restore the health of markets. It is noteworthy that hedge funds have mitigated to a large extent the downside versus unhedged portfolios in this correction. Second, it creates attractive opportunities for experienced hedge fund managers who are able to identify stocks with solid fundamentals that are the ‘winners’ on the long side, and those that are overvalued and overhyped ‘losers’ on the short side. To put recent market moves in perspective, consider the following: macroeconomic trends, liquidity and valuations.
Boardman feels that in general, hedge funds tend to perform well in the latter stages of a recovery when there often is greater dispersion in security pricing, global growth rates and interest rate differentials.
“The long-term benefits of hedge fund exposure have not changed. Although historically there have been periods when hedge funds as an asset class may have underperformed, the long-term benefits (superior performance, significant alpha creation, material downside protection, exceptional talent, low or negative correlation to other asset classes, portfolio diversification benefits, etc.) of this exposure continue to make sense in an overall portfolio context,” he says.
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