With most of soggy wet London still elated from the Olympics and Paralympics, it is hard not to be inspired to perform and excel to the best of one’s capabilities.
But it is the pursuit of performance excellence that many seem to have forgotten when it comes to investing their time, money and energy in anything, especially hedge funds. Much like the ‘real’ world of couch-based online addicts, investing seems to have turned into a passive sport with low rewards, leading to little incentive to perform and win.
Is this really the way to achieve performance mastery? Olympians would probably say no. To them, de Coubertin’s words resonate like a mantra: “Olympism is not a system, it is a state of mind.” I would argue that this is true also for all great hedge fund investors.
As the hedge fund investor Olympians prepare for their very own opening ceremony, to be held at The Great Court of the British Museum in London on 3 October, a new mood seems to be emerging between the different teams: one that is more collaborative than combative.
Until now, funds of funds have been angered as they saw investment consultants stealing their medals, in a match with no umpires to preside over ‘fair play’. Some FoHFs have retaliated and adopted tactics such as offering their arguably better research, due diligence and monitoring and reporting services for free (or nearly).
There is evidence, however, that a new team spirit is in the air. After a decade of dependency, hedge fund investors are ready to compete on their own. But what many have learned in a very short space of time is that to excel all good athletes have a coach or trainer – which is why some of the larger funds in the US are looking to return to some form of partnership with specialised funds of funds.
It is true that some investors may have got burned in the past three years and are having a rethink of their goals. But in the end, liabilities do not go away and the best solution will be one that preserves capital as well as enhances it in some way. One question they may want to ask is, are they looking at the timeframes correctly?
What all hedge fund athletes have to remember is that, like the Olympics that happens every four years, a lot can change in the investment review timeframe. Few Olympians repeatedly return more than two or three times; but there is always new, fresh energised blood to take their place.
New hedge funds start up every year and the elite FoHFs, like trained coaches, are great at spotting and nurturing talent. For example, Permal, like Tom Daley, continues to dive into the opportunities pool with the launch of its fourth fund.