A golden age for hedge funds
Optima Asset Management: Best Multi-Manager Hedge Fund (Equity Strategies) – Dixon Boardman founded New York-based Optima Fund Management* in 1988. Since inception, Optima has been at the vanguard of hedge fund investing, navigating across diverse market environments while providing its clients access to differentiated opportunities. In Optima’s June edition of its investor newsletter, Boardman pointed out that the whipsaw action of the markets in 2020 has been a challenge not just for hedge funds but for all asset managers.
“In my role, it’s critical to be highly selective about managers and to have a very real understanding of their ability to manage risk. This is a corny phrase, but I use it all the time: “There are old pilots, and there are bold pilots, but there are no old, bold pilots.”
For the majority of the year, Optima has intentionally overweighted its exposure to growth due to its constructive view on the technology, consumer and healthcare sectors. That emphasis has had a positive impact on its portfolios, says Yehuda Spindler, Head of Research. “And we expect that to continue in 2021 as we believe these areas will benefit from strong long-term secular tailwinds”.
In addition, long-short specialists with expertise in healthcare should be well positioned regarding the opportunities in the wake of Covid-19, he adds, while attractive valuations coupled with economic growth in China and India should be favourable for managers who focus on the region.
In terms of Optima’s research focus, its process has always employed both a top-down and bottom-up approach. Its portfolio management philosophy centres around concentration with diversification; in other words, sizing up high conviction managers but ensuring that it has managers with differing styles and strategies.
Discussing hedge fund performance in 2020, Spindler believes the asset class, in general, has met expectations given the volatility and dispersion, which typically bodes well for hedge funds.
“We believe that volatility creates investment opportunities. One strategy that makes sense to us in this environment is a well-diversified mix of absolute return, global macro, and CTA strategies, which can produce stable, meaningful returns in normal markets and left-tail convexity during stress periods,” noted Spindler.
“Overall, we are particularly pleased with the performance of our underlying managers; at Optima, we have been able to build a robust network of managers given our experience and reputation, and as a result, we have been able to access some of the most highly regarded hard-closed managers in the industry.
“Additionally, we continue to leverage our resources and scale in combination with our Forbes partners for the benefit of our clients; our goal is to generate alpha above the hedge fund benchmarks. While the markets have been challenging, the fundamentally driven bifurcation is creating pockets of strength and weaknesses which has had a positive impact on our portfolios,” states Spindler.
In Optima’s investor newsletter, Boardman remarked that this should be a golden age for hedge funds. Asked how he sees 2021 playing out, Boardman explains:
“Volatility is at very high levels, and more importantly, is here to stay. With fixed income no longer producing either the returns investors have received in the past, nor the stability that has traditionally been afforded, more investors are looking to hedge funds for upside potential and downside protection.”
As a result, Boardman says the firm is extremely constructive on the outlook for hedge funds.
“For Optima in particular, our deep research process, access to elite hedge fund managers, along with a flexible hedge fund model should be substantial positives for our firm, and our investors, for the upcoming year,” he concludes. “If there ever was a time to be in hedge funds, this is it.”
*Optima Fund Management was succeeded by Optima Asset Management in July 2019 when Optima was acquired by FWM Holdings LLC, the parent company of Forbes Family Trust.
Managing Director, Sector Head, Research
Yehuda Spindler joined Optima in 2006 and is responsible for managing directional hedge fund strategies across long-only, hedged equity, event driven/credit and multi-strategy managers. Additionally, he serves as the Portfolio Manager of several co-mingled and separate-account Optima products and is a member of the Portfolio Management Committee which is responsible for approving managers across all strategies within the Firm. He graduated cum laude from the Sy Syms School of Business, Yeshiva University, New York.