LONDON, July 8, 2011 /PRNewswire/ --
More and more the solution for wealthy individuals and institutional investors is to have your own private fund of funds (FoF), says Maggie Rokkum-Testi, General Manager and CIO of Thalia SA, in a new article for World Finance magazine.
Anyone reading the financial headlines in 2008 could be forgiven for thinking the hedge fund industry quietly folded its tents and melted away into the desert. Not so, says Rokkum-Testi: despite a decline in overall assets under management of 43 percent between 2008 and 2009, the industry survived and has been slowly rebuilding itself.
The article - published in the July-August issue of World Finance - explores how a complex mix of events in 2008, culminating in the panic around the Madoff scam, exposed a number of investment managers who hadn't done their homework. Even those companies like Thalia, which was not exposed to Madoff thanks to its thorough qualitative due diligence, had to work hard to manage the emotions of their investors.
Despite this turbulence, there are still more than 10,000 hedge funds in operation (estimates vary), and as such choosing funds to suit an individual investor's needs can be a minefield, says Rokkum-Testi. "If you are a single wealthy person or small institutional investor you would have to diversify across at least five or six funds minimum to spread your exposure to the different investment approaches," she says - but poor diligence can leave an investor exposed to the same risk multiple times. That's where the capabilities of an experienced hedge fund investor are most valuable.
"Transparency is a key issue in our industry," Rokkum-Testi says. "If you own a FoF that has 25 positions you should know exactly what funds are in that portfolio, but many FoFs only offer the top five positions and may not even indicate position sizes. The danger here is that a medium sized investor purchasing three or four FoFs may be doubling or tripling their exposure to a manager without knowing it. It is very important that the end investor gets the information he needs in terms of what kind of managers they have in the portfolio."
To find out more about how Thalia creates an effective fund of funds, pick up a copy of the July-August edition of World Finance magazine or view the article online at http://www.worldfinance.com/news/special-reports/article1992.html
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