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Hedge that made the grade

Date: Friday, January 30, 2009
Author: Michael Hobbs, Financial Standard.com

Morgan Stanley, BlackRock Investment Management, Select Asset Management, Winton Capital and Man Investments are the only alternatives fund managers from a pool of 19 to receive a 'recommended' or 'highly recommended rating' from Zenith Investment Partners.

Only seven alternatives funds gained at least a ‘recommended' rating. Morgan Stanley's FX Alpha Fund and FX Alpha Plus Fund along with the BlackRock Asset Allocation Alpha Fund - Class D and Select's Alternatives Portfolio and Futures Fund all made 'recommended' grade in the alternatives sector review. The Winton Global Alpha Fund gained a 'highly recommended' rating.

Man RMF Dynamic was the only hedge fund of fund to be awarded a ‘highly recommended' rating from the firm, no other fund of hedge fund gained a 'recommended' rating.

James Tsinidis, Zenith Investment Partners investment analyst, said the results are "unusual". He said a typical review of an asset class may include 30 funds and the firm normally expects around two thirds to achieve a ‘recommended' rating.

The reason behind the lacklustre performance of hedge funds and hedge fund of funds can be pin pointed at a lack of investment team experience, managers shelving funds or closing them altogether.

"In some cases we didn't think the manager was strong enough to make it to the recommended list, in other cases the managers were expecting the launch products in Australia at the time we did the review, but given the conditions they re-thought that strategy," he said.

"One fund in Australia actually closed as we were doing the review. In one case we liked a fund, but by the time we got back from travelling overseas, they'd decided to no longer provide it."

Those fund managers that did make the grade exhibited strong investment strategy, are experienced, showed no liquidity issues and overall had strong organisational structure in place.

Michael Hobbs