Why managed accounts are not suited to everybody

For all their recent popularity, it is widely recognised that managed accounts are by no means a panacea that will provide every investor with copper-bottomed protection against all the risks associated with hedge fund investment.

Sean McGould, Lighthouse Investment Partners, Richard Tomlinson, Tomlinson Investment Consulting and Marc Goodman, Kenmar

Nor are managed accounts seen as an appropriate option for all funds of funds, for several reasons. Foremost among these are the upfront costs associated with setting up managed accounts borne by the manager.

"Clearly there are significant costs involved in building a managed account platform, which will discourage certain managers from pursuing it," says Sean McGould, co-CIO of Lighthouse Investment Partners. "Over the years, we have beefed-up our operations team, which now looks more akin to a multi-strategy fund than a traditional fund of funds. There is more work involved in processing...