Fri, 09/11/2012 - 11:03
Interview with Stephen McGoohan (pictured), Man Group – Lack of portfolio transparency continues to be a major worry for investors. And whilst managed accounts provide many with the control and transparency they need when investing in hedge funds, continued market uncertainty and counterparty risk prompted Man Group to develop an online portal solution in March this year.
Named Clarus, the managed account portal provides clients with an additional layer of transparency by enabling them to visualise their hedge fund allocations and gain a better understanding of the investments they’re making.
Explains Stephen McGoohan, Man Group’s head of Managed Accounts: “Clarus was built with one of our key institutional clients so it’s basically been built by investors, for investors and tailor made for the investment community that we’re looking to market into.
“Being an online customisable tool Clarus allows investors to visualise the drivers of return and performance at the portfolio and managed account level but also allows them to visualise and understand the risks and risk factors they’re exposed to in their portfolio and underlying managed accounts.”
Crucially, this means Clarus is both backward-looking – what has already driven performance – and forward-looking – what is the risk exposure to commodities, for example? A client can then drill down deeper and analyse their exposure to energy, and then to oil, gas, etc. This enables investors to get a deeper handle on the performance of the portfolio, and adjust exposures accordingly.
This is important at a time when investors have concerns about increased market correlation, not to mention potentially high exposure to market beta.
“They can either adjust their asset class exposure themselves or they can get us to do it for them through a managed portfolio,” says McGoohan, who confirms that the majority of the USD8billion in platform AUM (representing 80 active managers) is invested in discretionary or advisory managed portfolios.
In McGoohan’s view, this added transparency has helped move the fund-of-funds model to Mark 2.0; where investors have the capacity to make sure-fire decisions based on meaningful insights: “Post-2008, we find ourselves working with more sophisticated institutional investors so it’s important that we make it easy for them to invest in hedge funds.”
Continues McGoohan: “Clarus makes it easier for a client to understand their hedge fund exposure and to think about it in a broader portfolio context. It’s all about insight and getting a better understanding of what’s driving risk in the investment portfolio.”
Insight is the key point. Investors want to feel more in control. Recent market volatility has unnerved them: the better customised the data is at their disposal, the greater confidence they will take from investing in hedge funds through managed accounts.
This means that rather than looking at hedge funds as separate distinct buckets, investors can visualise the role they play as part of their overall portfolio asset allocation. For example, a particular pension fund might have high exposure to US equities and decide they want specific exposure to emerging market equities in their managed account portfolio.
Managed futures can also be helpful for investors in terms of monitoring over-exposure to market beta. “If you’re worried about beta in your portfolio you can look at the data and then, potentially, reduce exposure to managed futures at that particular stage of the cycle (e.g. bull market). It’s allowing investors to think about hedge funds in a broader context,” says McGoohan.
After 2008, taking the surprise element out of hedge fund investing is a welcome development.
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