Hedge exposure

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Apr 4, 2007 4:48 pm

As a younger broker I'm starting to wonder if my clients might benefit from a small amount of exposure to hedge funds and/or private equity.  (i.e. 5% of portfolio in hedge/PE, primarily for diversification.)  

Are there any ways to get this exposure in smaller amts? 

I noticed the new PE ETF.  Any other ideas?

Also thoughts on the value or lack thereof to this kind of strategy are also welcome. 

Apr 4, 2007 4:55 pm

Try Franklin Templtons Mutual Recovery Fund. Its a way to sneak one in with some of the firms that do not allow hedge funds.

Apr 12, 2007 2:40 pm

[quote=gad12]As a younger broker I’m starting to wonder if my
clients might benefit from a small amount of exposure to hedge funds
and/or private equity.  (i.e. 5% of portfolio in hedge/PE,
primarily for diversification.)  

Are there any ways to get this exposure in smaller amts? 

I noticed the new PE ETF.  Any other ideas?

Also thoughts on the value or lack thereof to this kind of strategy are also welcome.[/quote]

The PE etf is very weak. Just buy some BDC's directly. I would note that bigger BDC's are very popular with yield chasing retail investors and so could be overpriced relative to smaller/younger BDC's. OTH the smaller BDC's usually don't have the capital base to do real buyouts, which some of the larger BDC's do.

There is really no cost effective way for retail investors to acess the world of big buyouts (except being on the other side of them ). Investing in highly leveraged companies (i.e PEQ) makes you very sensitive to economic conditions. When this all blows up, Seth Klarman will be laughing.

I would also note that the middle market (5-50M EBITDA) loan sector, while highly fragmented has attracted huge amounts of capital from every direction.

As for hedgefunds, that is a highly overated area. Upwards of 85% smoke and mirrors.

There are some mutual funds that do convertable arbitrage/long short. But for the most part you are paying alot for not very much.