Thomas Schneeweis on 9 things to look at before investing in hedge funds
Thomas Schneeweis says focusing on past performance is the first and biggest mistake investors make when it comes to asset allocation.
According to Schneeweis, investors should be rather focused on risk instead of returns.
“Much of the past, though interesting, may have very little relevance to what we do today,” he said.”
Who is Thomas Schneeweis?
Thomas Schneeweis is the Founding Editor of The Journal of Alternative Investments and is co-founder of the Chartered Alternative Investment Analyst Association.
He has more than 40 years’ experience in investment management. He is Partner and Head of Research at Yes Wealth Management which provides financial advisory as well as risk based asset allocation and Quantitative Investment Technologies.
He has co-authored several books in the area of asset management including The New Science of Asset Allocation: Risk Management in a Multi-Asset World and PostModern Investment: Facts and Fallacies of Growing Wealth in a Multi-Asset World.
Investing in hedge funds
Schneeweis offered several investment tips on what to look at when investors are looking to invest in hedge funds.
Let's look at these tips-
1. Beware of the unknown, beware of hedge funds
Schneeweis says most hedge funds have lower risk than individual stocks or even stock indices as individual stocks have an annual volatility of about 30%.
«The S&P500’s annual volatility is about 15%.
Most hedge funds (with the exception of some long bias or global macro hedge funds) have an annual volatility below 15% and even commodity trading advisors (futures and option traders) have annual volatilities close to that of the S&P500,» he wrote in his book.
2. Stocks for the long run
Schneeweis says hedge funds do add benefits
