I have been investing in hedge funds for more than 30 years. The first time was in the early 1980s, when I was a stockbroker on Wall Street, and friends of mine were doing a lot of business with what they called hedge funds. I didn’t know what hedge funds were so I tried to find out. The next thing I knew I was standing in George Soros’ office, and didn’t know who he was. Soros was managing a few hundred milliondollars at the time; and that’s how I got acquainted with hedge funds.
I started to invest in hedge funds, and ever since I’ve been investing in hedge funds. Of course, in those years we got 15 to 20% returns by just allocating to 10 or 12 different hedge funds but we had an interest rate environment which was very, very different. People tend to forget that in those years hedge funds were returning in the 20s and 30s but interest rates were in the double digits.
Now, in the current environment with the risk-free rate of return being where it is, it’s very hard to perform anywhere, for hedge funds as well. Having said this we’ve always been investing in hedge funds even though the times were hard, and they fell out of favour.
One of the reasons why we decided to launch this conference was that the interest rate environment is getting back to a more positive note in the United States and around the globe. I think the deflationary period is over and people are no longer scared of deflation. I was just talking with somebody who thinks that there’s a possibility Europe will see higher rates over the next few quarters, and that is a positive environment for hedge funds. It’s disruptive for the market, but this often means there are also opportunities for hedge funds. I think there’s going to be a new revival for this investment style.
Hence we decided to take the opportunity to get you all here to listen to some of the hedge funds that we think are great people who we’ve worked with for many years, and who have done fantastically well over the years. As you can imagine, as we’ve been investing with hedge funds for more than 30 years my firm has garnered a lot of experience with a lot of people that invest in hedge funds. We’ve always had hedge fund allocations in our portfolios, sometimes more, sometimes less. Over the years we have had as much as 40% of our global balanced portfolios in hedge funds. This went down to something closer to 5% and now we’re back to a 10 or 12% allocation to hedge funds. This is probably going to increase over the years to come.
– Eric Syz, CEO And Founder, SYZ Group