HNW perspectives on hedge funds…
Our panel chair, Mauricio Safdie felt that prior to 2008 the managers abused HNW investors due to flows being too strong into the HF industry (the balance of power sat with fund managers). However, now these investors are coming back and so we can say the industry is through the crisis.
For Brazil, HNW investors are looking at hedge funds again, 2008 slowed the process down but they saw that funds survived without the need to gate, and so local managers perhaps gained relative to global peers.
There is a challenge of perception though, the tradional story that hedge funds put forward about their role as a diversifier etc, was disproven in 2008, lack of correlation, high beta.
Ricardo Taboaco felt that the problem was on the side of the investors, with the problem starting with asset allocation. People were overinvested prior to 2008 and the investments did not match their needs, sort, medium & long term. It was this mismatch between assets and liabilities that created this problem. Asset allocation needs to be the cornerstone of any discussion between investor his or her advisor, because anecdotal evidence suggests that asset allocation is the most important thing.