REYL & Cie investment update highlights strong performance of hedge funds
REYL & Cie's investment team has highlighted the strong performance of hedge funds over the past two years in the company's latest Quarterly Compass investment update.
REYL & Cie says performance has been between 5 per cent and 11 per cent per annum, with all major strategies performing with a strong dependence on global equity markets, but with a low sensitivity (beta). Indeed, the correlation of the Global Hedge Index with the MSCI World has been around 90 per cent on a weekly basis over the last two years.
Despite these strong correlations and the very good performance of equities over the past decade, REYL & iCe says hedge fund strategies have had an average annualised return varying from 0.0 per cent to 2.7 per cent.
Alternative “correlated” strategies have historically not improved the risk-adjusted return of a diversified asset allocation portfolio composed of equities and bonds.
In order to improve the Sharpe ratio of such a portfolio, REYL & Cie says it is necessary to integrate funds that have two characteristics: little or no correlation with traditional asset classes, and good risk-return ratios.