Financial Times- Talk about a high-risk hedge fund and most people assume it is a tautology. This year’s sudden collapses of the $2bn flagship fund of London’s Peloton Partners and the $1bn New York-based Focus Capital, as well as a raft of smaller funds, has done nothing to change that view.
But a small group of hedge fund investors actively seeks out the riskiest hedge funds – and believes such funds allow them to chase high returns while avoiding the peril behind the blow-ups of the past 12 months: leverage.
Rather than find “safe” investments and add gearing to boost returns, they look for managers who aim high by investing only in their best ideas, by taking a view on market direction or by seeking trading opportunities.
“This is hedge funds returning to their roots, to the characteristics of the last decade,” says Tom Gimbel, managing director of Optima Fund Management, the $6bn New York fund of hedge funds.
