Hedge Funds: Custom Portfolios Strategy
Hedge Funds: Custom Portfolios Strategy

Hedge Funds: Custom Portfolios Strategy

 
 
 
Summary

Portfolios of hedge fund interests designed to address clients’ specific requirements, such as risk exposures, return targets, strategy constraints, liquidity preferences and integration with existing investments.  

 
 
Investment Approach
Philosophy

Superior investment returns, in the team’s view, are driven by an intense focus on risk vs. reward. The overarching investment philosophy hinges on managing risk first and foremost, then maximizing returns within that risk-managed portfolio. Each hedge fund must offer strong risk/reward potential, both on an individual basis, and when combined with other hedge funds.  The primary focus is picking the best managers using a bottom-up research approach. A top-down strategy analysis guides the team's manager search efforts to higher alpha opportunities.

 
Differentiators
Outcome-oriented Portfolios

Discretionary hedge fund investment solutions tailored to address a client's needs and preferences regarding return target, risk exposures, liquidity, strategy or geographic concentration, portfolio reporting and administrative services. 

Experienced and Stable Team of Investment Specialists

Portfolio managers average close to 20 years of industry experience and close to ten years of experience working together. Investment professionals work in strategy-focused teams that, in the team's view, enable them to: gain deep technical knowledge of alpha generation strategies within their designated hedge fund sector, build strong relationships that enhance sourcing and due diligence activities and identify innovative managers and strategies before they are widely known.  

Disciplined Investment Process

The team employs a tested multi-step due diligence process that combines qualitative, quantitative and operational risk perspectives. Bottom up manager evaluation is combined with a top-down view of the investment landscape to arrive at desirable position sizes and strategy, geographic and regional exposure.

Strong Operational Risk Management Team and Processes

Well-resourced team with veto power over investment decision. Conducts on-site due diligence, background investigations, service provider evaluations, document review and analysis of the control environment, among other activities.

 
 
 
Investment Process
1
Understand Client Objectives

In-depth discussions to determine needs and preferences—return targets, risk exposures, liquidity, strategy or geographic concentration, correlations with existing holdings and reporting/tax requirements.

2
Investment Selection

Through an open-door sourcing policy, and by conducting rigorous investment, operational and quantitative due diligence, the team seeks to arrive at a focused group of hedge fund managers that they believe are capable of generating high degrees of alpha on a persistent basis.

3
Portfolio Construction

The team first takes a holistic view of the client's overall investment portfolio, seeking to determine the current level of exposure to market risk, active risk and liquidity risk. They then proceed to construct a custom investment portfolio that they believe has the potential to achieve the client's specific investment objectives. 

4
Risk Management

Post-investment, both the overall portfolio and all underlying hedge fund investments are continuously evaluated through qualitative and quantitative measures. If the performance of an underlying investment deviates from the team's expectations, appropriate action is taken to remediate the effects of the investment on the portfolio. Continuous dialogue with underlying managers is central to the team's risk management process.

5
Portfolio Management

Frequent communication with clients enables the team to identify their changing needs and adjust the investment program accordingly.

 
 
Portfolio Managers
Chief Investment Officer and Head of the AIP Hedge Funds Team
21 years industry experience
Executive Director
19 years industry experience
Managing Director
23 years industry experience
Managing Director
23 years industry experience
Executive Director
13 years industry experience
Managing Director
26 years industry experience
Managing Director
15 years industry experience
Managing Director
19 years industry experience
Managing Director
20 years industry experience
Vice President
10 years industry experience
Managing Director
15 years industry experience
 
 
 
 

Alternative investments are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for long-term investors willing to forego liquidity and put capital at risk for an indefinite period of time. Alternative investments are typically highly illiquid – there is no secondary market for private funds, and there may be restrictions on redemptions or assigning or otherwise transferring investments into private funds. Alternative investment funds often engage in leverage and other speculative practices that may increase volatility and risk of loss. Alternative investments typically have higher fees and expenses than other investment vehicles, and such fees and expenses will lower returns achieved by investors.

This is prepared for sophisticated investors who are capable of understanding the risks associated with the investments described herein and may not be appropriate for you.  The information presented represents how the portfolio management team generally implements its investment process under normal market conditions.

All information provided has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The information herein has not been based on a consideration of any individual investor circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.  There is no guarantee that any investment strategy will work under all market conditions, and each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. 

Any views and opinions provided are those of the portfolio management team and are subject to change at any time due to market or economic conditions and may not necessarily come to pass. Furthermore, the views will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring. The views expressed do not reflect the opinions of all portfolio managers at Morgan Stanley Investment Management (MSIM) or the views of the firm as a whole, and may not be reflected in all the strategies and products that the Firm offers.

Diversification does not protect you against a loss in a particular market; however it allows you to spread that risk across various asset classes.  Past performance is no guarantee of future results.

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Funds of funds often have a higher fee structure than single manager funds as a result of the additional layer of fees. Alternative investment funds are often unregulated, are not subject to the same regulatory requirements as mutual funds, and are not required to provide periodic pricing or valuation information to investors. The investment strategies described in the preceding pages may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability.

A separately managed account may not be suitable for all investors. Separate accounts managed according to the Strategy include a number of securities and will not necessarily track the performance of any index. Please consider the investment objectives, risks and fees of the Strategy carefully before investing. A minimum asset level is required. For important information about the investment manager, please refer to Form ADV Part 2.

No investment should be made without proper consideration of the risks and advice from your tax, accounting, legal or other advisors as you deem appropriate.

The information on this page is solely for informational purposes only. It is intended for the benefit of third party issuers and those seeking information about alternatives investment strategies. The information contained herein does not constitute and should not be construed as an offering of advisory services or an offer to sell or a solicitation of an offer to buy any securities in any jurisdiction in which such offer or solicitation, purchase or sale would be unlawful under the securities, insurance or other laws of such jurisdiction.

All investing involves risks, including a loss of principal. Alternative investments are speculative and involve a high degree of risk. These investments are designed for investors who understand and are willing to accept these risks. Performance may be volatile, and an investor could lose all or a substantial portion of his or her investment.

 

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