David Smith, chief investment officer, Multi-Manager
The single-manager hedge fund classification,
multi-strategy, has led many investors to categorise funds that
fall into this group as potential competition to funds of hedge
funds (FoHFs). However, this classification may be misleading.
A close analysis of the group of funds, known as single-manager
multi-strategy funds (SMMS), reveals that such funds have
generally evolved into this classification because their
original strategy focus was too narrow.
Most SMMS funds started life as macro or general arbitrage
specialists, but many found it necessary to develop other hedge
fund strategies in order not to be constrained by the
cyclicality of their original focus - such as fixed income,
macro trading or distressed arbitrage - and to continue raising
assets while maintaining performance. The universe of SMMS
funds is relatively small and easily divided into a few key
sub-categories. At the same time, the spread of...