Will Horlick’s hedge fund for the masses work?
Oct 19th, 2006 | Filed under: Hedge Fund Industry TrendsBy: Jeremy Batstone, Charles Stanley & Company
Published: October 18 2006, Money Week
The UK alternative investment community is all abuzz with news that a new fund of funds will target the “mass affluent”. This development is put in the context of alpha/beta separation for the masses in this article published this morning.
… the investment world should, and will, evolve towards a world of separating passive investment decisions (beta investing) from active decisions (alpha investing). Most institutional investors continue to merge their alpha a beta decisions(i.e. an institution typically decides how much money it wishes to invest in equities and then goes out and hires a fund manager to manage it). This is, in our opinion, inefficient as the two decisions are not linked. Investors should, instead, decide which asset classes they want to be in and then overlay on top of those asset classes the best alpha managers they can find. This alpha overlay is a better way to run a portfolio and many institutions at the cutting edge of industry thinking are moving towards managing money in this way.”
This a tough concept to communicate to the masses, but Batsone does an admirable job. Advisors who say “my clients will never get this concept” might find this article particularly useful.
