Fund selectors discuss prognosis, price, volatility and tail risk

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Gold is one of the assets mentioned in this roundup of views from fund selectors on prognosis, price, volatility and tail risk.




Name: Christian Hille

Title: Co-head Multi Asset

Company: DWS Investments

Base: Frankfurt am Main


What is the outlook for developed equity markets?

There is a lot of deleveraging still to occur, particularly in the financial sector. To properly resolve the problems that we thought the financial crisis had resolved – with large funding from sovereigns – you probably have to live in developed countries with much lower returns for the coming years.

It will be interesting to see in the next years if people realise that, and live with it, or whether they still expect double-digit returns, and exert huge pressure on fund managers to take disproportional risk.

Crises are coming with increased frequency and it appears the number of safe assets is reducing to just one or two – and everyone wants to get into them.

That means at the moment, volatility has suddenly increased even in presumably safe asset classes.


Name your price



Name: Manuela Thies

Title: Director, head RCM Multi-Management

Company: Allianz Global Investors

Base: Frankfurt am Main


What are your views on fees managers charge, in particular performance fees?

I would not say performance fees are a bad thing per se, but they need to be fairly calculated, and there are many different ways of looking at them.

A decent performance fee, for example, combined with a relatively low management fee, and features like a hurdle rate and high water mark can be a good base for a fund manager to strive for outstanding returns.

Total costs is what we are sensitive to. If you have a performance fee it is generally a one-sided option – if the fund outperforms, we have to pay the fee, but if it underperforms we do not get the fee back.

The main thing is, a target fund must provide alpha for us above a benchmark or deliver/exceed target returns – after fees.

If we do not think funds are suitable to provide alpha after costs, then we will look for passive products like index derivatives or ETFs instead.


Dampen Volatility



Name: Morten Spenner

Title: Chief executive

Company: IAM

Base: London


Are investors right to lose faith in hedge funds?

Hedge funds have had a testing time, but are now back to doing exactly what investors expect of them.

Their performance from January 2010 to date has matched the main expectations of clients to: dampen volatility in tough times and generate consistent returns.

Over this period, hedge funds have produced the same return as equity at +3.7%, but with low volatility at 4.6% and positive months 60% of the time (same figures for equity are 17.70% and 45%, respectively).

The hedge fund world has matured and institutionalised significantly since 2008. Transparency, liquidity, and investor control have all been much enhanced.

If hedge funds can continue along a similar performance path as that described above, clients should regain their confidence to place hedge funds in their portfolios.

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