Damn the torpedoes, Guggenheim launches hedge fund platform for RIAs

Damn the torpedoes, Guggenheim launches hedge fund platform for RIAs
DEC 03, 2012
Guggenheim Investment Advisory today launched a hedge fund platform for independent registered investment advisers. “We've got a strong legacy of providing alternatives to ultrahigh-net-worth and institutional clients, and we're bringing that to the independent adviser,” said Michael Christ, head of the Guggenheim Partners LLC unit. “There's a big trend of privately owned advisory firms coming to market, and as those organizations are built out, there's a big challenge building out a fully fledged investment program,” he said. “The main area we see advisers need some help is alternatives.” To give advisers a leg up, Guggenheim is limiting the hedge funds on its platform to 50 or so that are hand-selected by its internal investment committee. The strategies range from global long/short equity and credit strategies to global macro. The minimum investments will begin at $100,000, depending on the fund, and fees will be on a sliding scale, depending on the investment commitment. Hedge funds of all shapes and sizes over the past three years have struggled to perform. The Dow Jones Credit Suisse Core Hedge Fund Index has a three-year annualized of 1.3%, while the plain-vanilla S&P 500 has a return of 13%. Even high-profile hedge fund managers such as John Paulson have struggled. His flagship hedge fund was down 16% in the first half of the year, after losing 55% in 2011, according to The Wall Street Journal. The poor performance has translated to net outflows of more than $6 billion in the 12-month period through August, according to Morningstar Inc. Meanwhile, liquid alternatives, those in a mutual fund wrapper, have had inflows of more than $9 billion. Liquid alternatives might not be the best bet for advisers today, though, Mr. Christ said. “The number of hedge fund managers that offer liquid alternatives is still very small, and the number of strategies available are restricted by the mutual fund wrapper,” he said. For example, private real estate and private equity are two strategies not available in a mutual fund because of the illiquidity of the strategies.

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