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Hedging Your Bets

Everyone wants to know where the market is heading, and what is to come. There are lots of opinions, some educated and some not. One of my clients, Scott Williams of Fiftyone Capital, runs one of Asia’s top performing hedge funds, and over the last two months, he has called each event correctly before it happened.

On the 18th of February, I arrived at his boardroom, and his first comments to me were, “I’m out!” Out of equities, out of risk, into defensive assets. At that time, the market was at an all-time high. The virus was a China thing, and the market was not responding to the implications of a greater spread.

On the 25th Feb, Scott emailed me the following:

Predictions are hard… gut feeling is not good with markets and I think time for risk off is here. Virus will land in the US… when it does the response will be huge. Outside of the virus it’s the economic response. At some point people are going to call bullshit on the central bank interventions…

At the same time, President Trump tweeted this:

What is a hedge fund?

According to Dummies.com, “a hedge fund uses a range of investment techniques and invests in a wide array of assets to generate a higher return for a given level of risk than what’s expected of normal investments. In many cases, hedge funds are managed to generate a consistent level of return, regardless of what the market does”.

Many hedge fund investment strategies aim to achieve a positive return on investment regardless of whether markets are rising or falling. They are otherwise known as long/short funds. Hedge fund managers often invest money of their own in the fund they manage.

A hedge fund typically pays its investment manager an annual management fee (for example, 2% of the assets of the fund), and a performance fee (for example, 20% of the increase in the fund’s net asset value during the year).

Because the manager is co-invested, the performance fees serve to align the interests of managers with those of the investors in the fund. Some hedge funds have several billion dollars of funds under management (FUM)

Where is the market heading?

To understand where the market is at, according to Scott Williams of Fiftyone Capital, watch his webinar below. The Progressive Global Fund is an Australian domiciled hedge fund that is managed by the team at Fiftyone Capital. The fund seeks to generate absolute returns for their investors in excess of 10% p.a. irrespective of broader market cycles.

The webinar runs for an hour, so sit back with your favourite beverage, and educate yourself. Remember, the facts are the facts. How we feel about the facts is up to us.

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