Invest Smart With Hedge Funds

Every successful investment portfolio should contain some well-formulated hedge fund exposure. Smart investors know that hedge funds are not an asset class—but a flexible format with additional tools for running money. 

Last year was a banner year for many hedge funds, with top hedge funds having some of their biggest gains of the last decade. Almost every strategy performed well, with some specialty stock funds in technology and health care up over 30 percent. 

Some of the industry’s biggest names navigated last year’s volatility, profiting from opportunities in March’s sell-off and the subsequent huge rally in risk assets. For example, Bill Ackman’s Pershing Square and Izzy Englander’s Millennium were among the leaders in the industry with gains of 70 percent and 26 percent respectively.  And Ken Griffin’s Citadel delivered a 24 percent return in its Wellington fund.

According to PivotalPath, based on data from a group of more than 2,000 “institutionally relevant” hedge funds representing $2.3 trillion in assets under management, equity-sector hedge funds were up around 20 percent, outperforming other hedge fund strategies by a wide margin. The next-best strategies were diversified equity and event-driven funds, both up around 10 percent for the year. 

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Savvy investors look to alternative investments like hedge funds to generate yield and diversify their portfolios. The smart way to invest in hedge funds is to place your hedge fund allocations into the appropriate risk buckets in your portfolio—so for example your long/short equity hedge funds belong in your overall equity allocation.

Equity remains the largest category of hedge fund managers. Experienced hedge fund managers are arguably some of the best stock pickers in the world. And investors are increasingly turning to hedge fund managers’ innovative long-only investment solutions to access attractive equity returns on a fee-aligned basis.

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