The Numbers Adding Up For 130/30 Funds

Date: Monday, December 11, 2006
Author: Dailyii.com

These are boom times for the so-called 130/30 funds, the long/short instruments that are sweeping the financial services industry and raking in billions. The funds, whose 130% refer to the percentage of a portfolio in long positions against a 30% short position, are being called the "missing link" between alternative investments and traditional asset management industries. The goal is to equal a net of 100% of the portfolio, so any combination will work— such as 120/20 and 140/40 – and to stay close to or outperform their benchmarks. They may be just the ticket for pension schemes wishing to ease into hedge funds, Carolina Minio-Paluello, a director on Goldman Sachs Asset Management’s quantitative resources team told Financial News. And it’s not bad for business, either: Minio-Paluello says her firm has attracted more than $1 billion assets with their variation on the same scheme, a 135/35 number, in a little more than year. "It’s a brilliant idea," she says. "We never thought the market was ready for it but we have experienced a big appetite." The appetite comes with a concern; however, as investors fear hedge-fund-like performance may also mean hedge-fund style fees. Hugh Cutler, managing director of Barclays Global Investors, attempts to allay such worries by saying his firm takes "the same proportion of outperformance as in our long-only and hedge funds, for which we charge market rates. Per unit of outperformance, hedge funds are not expensive."