In the following video, Paul Beattie, partner at BT Global Growth, discusses the benefits of investing in a hedge fund and the value of adding a hedge fund to an investor’s portfolio.
Transcript of the video
I think Jacques and I would try to convince you that it’s a better way to invest. So we designed our particular Hedge Fund to be unlevered. So imagine we’ve got $100 to invest, what we do is we were $70 long. We starts with like investment opportunities we like, so we’re 70% long. We’re not 100% long, we’re 70% long.
We find a lot of investments that are tremendously overvalued and frankly fully valued, overvalued, we’re in a sector that’s facing difficulty. There’s an opportunity that stocks go down. There’s an opportunity to make money as they decline. So we go 30% short. So conceptually, what is our exposure in a market? It’s not 70%. It’s got to be less. Is it as flow as maybe 40% in net exporter? So we have 100 cents on the dollar working but maybe only half of the 40%-50% market exposure. And frankly overtime it works.
Let’s say the market we’re having in September 1987 way back then, that the Dow went down 17% a day. Well there’s no way our fund’s going down. You know our fund requires a 70% long, and a 30% short. There’s no way it’s going down 17% that day. The short will make up for half the exposure. So I think it works.
It makes more sense especially in an inefficient market. If you don’t believe the efficient market theory then there’s always something tremendously overvalued and there’s always undervalued opportunities versus the traditional long only. You know 40% of your money in the bonds and 60% in the equities, well bond markets is not going to give you anything. You know 2%, 3% returns at best and frankly we think you’re taking on quite a bit of risk and so you still get that same 70% exposure, 60% long exposure. Why not do it our way? Hedge fund investing makes sense.