Hedge Fund Allocation
The Challenge: A corporate entity allocated to multiple hedge funds of funds. The entity realized that the combination was likely sub-optimal as a hedge fund allocation. They engaged us to evaluate the current structure, and to develop a plan to improve the allocation.
The Solution: Our team identified the strategy areas of overlap and gaps, as well as fee and liquidity inefficiencies within the existing structure. Our recommendations focused on replacing sub-optimal managers, adding diversifying strategies, and developing a tactical allocation overlay that would influence the inter-strategy movement of capital going forward.
The Result: Recommendations for manager and structure improvements provided a more attractive risk-adjusted return and minimized drawdown expectations. Once the structural enhancements were implemented, we provided monthly monitoring and commentary for the overall portfolio. Additionally, we embarked on a campaign to educate the client on the benefits of allowing some direct hedge fund exposure as part of the hedge fund mix. Ultimately, the client determined that a portion of the allocation would be comprised of direct hedge fund managers as well, which were then sourced by members of our team.