A more volatile strategy of hedge fund investing is making it’s way to the broader market of mutual funds. Among the top hedge fund-like mutual funds is the Diamond Hill Focus Long/Short fund. Diamond Hill works closely with the companies they are invested in, to show a profit whether the stocks are going up or down.

Ric Dillon, the manager of the $442 million Diamond Hill Focus Long-Short Fund has placed his bets on airlines. He expects that the recent bankrupcy of several major airlines will mean fewer planes are in the sky. This will then turn the 28 years of bad business into profit in their opinion.

Dillon’s stock-picking produced a return of 17 percent in the past 12 months, exceeding the 12 percent advance of the S&P 500. According to a Morningstar profile, the fund has generated average returns of 8 percent a year, a performance Morningstar’s analysts called “better than most of its rivals, and it easily trumps its benchmark Russell 3000 Index’s 1.9 percent average annual loss.”

The Credit Suisse/Tremont Hedge Fund Index shows the 3-Year Average annual return at 12.01%, and sets the Average Annual since inception at 10.95%.

The fund’s performance however, is more volatile and takes more risks than that of similar funds. The fees are also higher, as is the expense ratio. For example, Diamond Hill Focus Long-Short A.(DIAMX) shows a 17.8% 1 Year Return and a 17.8% annualized 3-year return with an expense ratio of 1.78% and a minimum initial investment of $10,000.

In comparison, a Hussman Strategic Growth (HSGFX) initial investment was only $1,000, and they showed a 5.5% return after one year with similar statistics. High fees, higher than average risk, but higher than average returns. Seems like some mutual funds are using the same strategy as hedge funds.

Other notorious Mutual funds grouped together by Morningstar as mutual funds who have Hedge Fund like strategies include: Schwab Hedged Equity Investor, TFS Market Neutral, Hussman Strategic Growth, Calamos Market Neutral Income A, and James Market Neutral.

Alex Akesson
Contributing Writer
HedgeCo.Net
Email: Editor@hedgeco.net

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