According to Jefferies, the recent market volatility, together with what feels like a general sense of apathy towards hedge funds, mean that now is excellenttime to revisit the larger listed hedge funds and see if there are any bargains out there.
The listed hedge fund universe has never been one of the most exciting areas for investors. The number of listed funds had been in decline since 2008 until mid-2014 when the IPO of Pershing Square Holdings (in October 2014) reversed the trend. However, over the past few months listed hedge funds have once again fallen out of favour with investors as poor returns have given investors a reason to avoid the sector.
High fees can also be blamed as one of the reasons investors have fallen out with listed hedge funds. It is clear that hedge fund fees do not leave enough on the table for investors in a lower return environment. Then, there’s a growing number of substitutes on the market such as ETFs and mutual funds which provide a similar service at a reduced cost.
Still, over time listed hedge funds have shown that they can provide better-than-average risk-adjusted returns as well as diversification and capital preservation — although all of these factors may not always occur in unison.
With the above in mind, this week Jefferies initiated coverage on the listed hedge fund universe. The five listed funds the research outfit recommends BH Global, BH Macro, Boussard & Gavaudan Holding, Pershing Square Holdings and Third Point Offshore.
Listed hedge funds: Why should you invest
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