What is Mercer’s View on Hedge Funds?
We do not think of hedge funds as an asset class, rather as a collection of heterogeneous investment strategies that can be used to gain exposure to a variety of nontraditional risks (hedge fund risks). In fact, individual hedge fund managers implementing the same investment strategy often target and generate contrasting risk profiles.
Key Elements of The Hedge Fund Tool Box
- Long and short investing
- Manager skill
- Absolute return
- Investment flexibility
Hedge funds offer greater flexibility in execution and a broader mandate through fewer constraints.
Of course, hedge funds aren’t without risk. Many risks are no compensating, so diversification is critical. Successful implementation helps achieve desired benefits — manager selection, due diligence, risk monitoring and portfolio construction are critical.
Why Now Might Be the Right Time to Look at Hedge Funds?
- Investors increasingly seek greater contribution from “alpha” to capitalize on policy divergence, rising dispersion, continued M&A activity and maturity of credit/default cycle
- Forward-looking potential for market beta is weak
- The number of hedge funds is unlikely to fall substantially in the near term
How Mercer Can Help
Mercer alternative investments provide a solid means to guard against the volatility of equities, hedge against inflation, and achieve better returns. Our hedge fund strategy is to diversify return drivers in the growth portfolio and generate attractive risk-adjusted returns relative to equities over a market cycle. Please fill out the form below to find out how a Mercer consultant can help deliver the most effective investment strategies for your portfolio.