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(June 3, 2004) If you think hedge funds lack staying power, think again. A recent Morningstar Canada survey of fund and product managers finds that hedge funds and emerging variations will dominate new product launches. Many traditional fund managers are also expected to move into the hedge fund arena, according to the survey respondents.
This means advisors will have to beef up their knowledge of hedge funds, says Scott Mackenzie, Morningstar Canada’s president and CEO. “There’s all kinds of risk involved with hedge funds,” Mackenzie told attendees of the Advocis annual conference in Calgary last week. “When the markets go down, you know your clients’ portfolios are going down. You don’t necessarily know that with hedge funds. So it’s absolutely critical that you understand the experience and track record of the manager before recommending any of your clients go into hedge funds.”
From the respondents’ perspective, up-and-coming hedge fund variations will include funds that have a dedicated short bias. “I find this surprising since these funds invest half in T-bills and the other half is shorting the market or a short segment of the market,” says Mackenzie. “It will take a very skilled manager to deal with short positions.”
As for hot specialty areas, fund managers surveyed expect China and India to perform the best over the next five years. Over the short and long term, the vast majority see equities as the leading asset class, with Asia and emerging markets leading the stock market. But what will really help North American equity markets is a reduction in U.S. deficits, say survey respondents.
Surveyed fund managers also believe interest rates will indeed rise in the next 12 months but not by more than 1%. “This is comforting because there’s been a lot of hype surrounding interest rates and what that will do for our portfolios and the economy,” notes Mackenzie. “Interest rates are still really low, so having them go up by one percentage point is hardly a reason for moving money out of the markets.”
As for industry issues, fund managers expect more debate on management expense ratios (MERs) (are they too high?), fund-cost transparency (where specifically is the MER going?) and merit-based compensation, which would see fund managers paid based on how they actually perform. They would have to achieve a certain level of performance before they get a conditional level of pay.
• • •
To brush up on hedge funds, visit Advisor.ca’s “CanHedge” section in the Product Zone, or click here to sign up for our monthly CanHedge e-newsletter.
• • •
Filed by Deanne N. Gage, Advisor’s Edge, deanne.gage@advisor.rogers.com.
(06/03/04)
|
(June 3, 2004) If you think hedge funds lack staying power, think again. A recent Morningstar Canada survey of fund and product managers finds that hedge funds and emerging variations will dominate new product launches. Many traditional fund managers are also expected to move into the hedge fund arena, according to the survey respondents.
This means advisors will have to beef up their knowledge of hedge funds, says Scott Mackenzie, Morningstar Canada’s president and CEO. “There’s all kinds of risk involved with hedge funds,” Mackenzie told attendees of the Advocis annual conference in Calgary last week. “When the markets go down, you know your clients’ portfolios are going down. You don’t necessarily know that with hedge funds. So it’s absolutely critical that you understand the experience and track record of the manager before recommending any of your clients go into hedge funds.”
From the respondents’ perspective, up-and-coming hedge fund variations will include funds that have a dedicated short bias. “I find this surprising since these funds invest half in T-bills and the other half is shorting the market or a short segment of the market,” says Mackenzie. “It will take a very skilled manager to deal with short positions.”
As for hot specialty areas, fund managers surveyed expect China and India to perform the best over the next five years. Over the short and long term, the vast majority see equities as the leading asset class, with Asia and emerging markets leading the stock market. But what will really help North American equity markets is a reduction in U.S. deficits, say survey respondents.
Surveyed fund managers also believe interest rates will indeed rise in the next 12 months but not by more than 1%. “This is comforting because there’s been a lot of hype surrounding interest rates and what that will do for our portfolios and the economy,” notes Mackenzie. “Interest rates are still really low, so having them go up by one percentage point is hardly a reason for moving money out of the markets.”
As for industry issues, fund managers expect more debate on management expense ratios (MERs) (are they too high?), fund-cost transparency (where specifically is the MER going?) and merit-based compensation, which would see fund managers paid based on how they actually perform. They would have to achieve a certain level of performance before they get a conditional level of pay.
• • •
To brush up on hedge funds, visit Advisor.ca’s “CanHedge” section in the Product Zone, or click here to sign up for our monthly CanHedge e-newsletter.
• • •
Filed by Deanne N. Gage, Advisor’s Edge, deanne.gage@advisor.rogers.com.
(06/03/04)
