Fortune Asset Management has moved its market wizards fund of hedge funds to a manager of managers structure.
The fund now invests solely in managed accounts through Chicago-based platform HFR Asset Management. It was chosen because Fortune Asset Management believes it is the most secure managed account platform through which to hold clients’ assets.
Fortune says it is not limited to the managers already on the HFR platform. It can select any manager and direct them onto the platform.
Fortune says transparency is still difficult to come by in the hedge fund world but managed accounts solve this problem as the multi-manager has greater control over the assets. It says the multi-manager does not need to see every single holding on a daily basis but monitoring the market exposures can alert multi-managers to any style drift or other problems in underlying portfolios.
Liquidity can also be a problem for funds of hedge funds since some underlying funds operate a tie-in and allow redemptions to take place bit by bit. Fortune says even if a fund of funds manager spots a problem in an underlying fund, it can often be too late to react due to the redemption terms. This does not happen when using managed accounts because the investor, not the manager, holds the account.
Investment director Jack Schwager says: “Partial transparency does does do anything. It is useless without monitoring. Some people say portfolios are so big, how can you look at the positions of every manager every day? I would be surprised if a handful of hedge fund managers do that. All I need to know is the market exposures, not the specific positions.”