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“The edge in hedge funds is being able to invest in ways that mutual funds can’t,” said Greg Coules, AB ’92, managing director and head of research at Metropolitan Capital Advisors. He was among alumni panelists who spoke to students about the industry at the Hyde Park Center on November 9.
For example, hedge funds can choose liquid as well as “illiquid” investments, said Michael Toporek, AB ’86, MBA ’87, managing general partner and cofounder of Brookstone Partners. “This movement is causing a sea change in the capital markets, and demanding that multi-strategy hedge funds unearth global opportunities where returns are ahead of risk. The mandate is to generate high-risk adjusted returns, no matter whether it’s funding life insurance policies or a financial mechanism.”
According to Michael Litt, ’85, partner, portfolio manager, and strategist for FrontPoint Partners LLC, “As globalization renders traditional [cash/stock/bond] diversified schemes less powerful, capital will move into [hedge fund] types of investment products.”
Within the industry, funds of funds are among the fastest growing investment vehicles, comprising $300 to $500 million of the $1.2 to $1.3 trillion market, according to Jimmy Liew, AB ’91, managing director of PlusFunds Group, Inc..
Managers use in-depth knowledge of a market and quantitative strategies that create models to “give an idea of the returns,” said Larry Seruma, managing director, VegaPlus Capital Partners.
To enter the trade, “be aggressive, learn as much as you can everywhere you go, and don’t be afraid to move on,” said Emil Westergaard, AB ’89, healthcare portfolio manager at Amaranth LLC.
And, said Coules, to be good, “You can’t be a consensus thinker. The only way to do well, be fulfilled, and get rich is to think outside the box.”
—Carmen Marti