The company’s soon-to-be listed market wizards fund of hedge funds invests entirely in managed accounts and investment director Jack Schwager believes that others will follow this trend.
This coincides with FSA proposals to allow retail investors access to retail focused funds of alternative investments.
Schwager says investors can benefit from having exposure to a diverse hedge fund product that is capable of producing positive returns in bear markets but he believes that managed accounts are more suitable to the retail market than a portfolio of existing hedge funds.
Lack of transparency has dogged the hedge fund industry for years and Schwager points out that there may even be limited transparency for fund of hedge fund managers in respect of their underlying holdings. Managed accounts differ in that the fund of hedge fund manager can see through to all the underlying positions.
Schwager says: “There are a number of advantages to managed accounts. Daily pricing means better liquidity. I can give 15 business days’ notice, which is better than the fund of funds structure that has lock-ups. The underlying managers have no access to cash movements so they could not link it to another account, which protects against fraud.”