Small hedge funds have missed out on assets pouring into their larger brethren, but liquid alternatives give the little guys a fighting chance.
Neuberger Berman’s absolute return multi-manager fund is the firm’s first mutual fund, giving investors access to strategies usually just available through hedge funds, reports Institutional Investor. The small hedge funds that Neuberger has long supported hold their investments in accounts that Neuberger can oversee directly through its own platform. The firm’s portfolio managers are then able to see trades happen in real time.
The young fund has been producing an average annual 5% return over the last three years, with the same volatility as the Barclays Aggregate Bond index.
Post-financial crisis, institutional investors have been avoiding funds of hedge funds and going directly to hedge funds themselves for investments. But small hedge funds weren’t getting the assets.
While liquid alts were designed for retail investors, institutions have been picking them up for the lower fees, greater liquidity, and transparency. The space is booming, with $22 billion poured into liquid alts in 2014, and $2 billion in inflows in 2015 through April 15. BNY Mellon, Goldman Sachs Asset Management, and PIMCO have all hopped on the liquid alts bandwagon. About 20% of Neuberger’s liquid alts assets are from institutional investors. Writes Institutional Investor:
“They are taking Neuberger’s operational setup that we have,” says Jeffrey Majit, co-portfolio manager. “They are taking Neuberger’s operational risk rather than the operational risk of a small hedge fund. In the post-Madoff era, that is attractive.”
Photo: Wikipedia.