In the following video Paul Beattie, partner at BT Global Growth, discusses how to manage volatility in a Hedge Fund.
The reality is it’s all about managing volatility. That’s what our firm spends the most time on, trying to figure out how to temper the volatility. I mean that’s what we’re all about and it’s not easy to do. This is the most difficult part of our business. Managing money and taking out the volatility. One thing is for sure, there will be volatility. There will be volatility in the stock market, you have to accept it.
But I think a Hedge Fund product like ours and other hedge funds in general are open embracing the concept of how to manage volatility and there are many ways to do it. None of them are perfect and that’s our challenge.
You pick the sectors you want to invest in. Within any given sector, there multiple place, you analyze the industry. You get the help of research firms, brokerage firms who give you all their insights into any particular industry, valuing all of the companies. They do a lot of the groundwork for you. You get a chance to choose what you think and you know we base everything on cash flow. We’re financial analyst here. We value companies based on cash flow and multiples to cash flow.
And so it’s not difficult to find companies you know trading in six, seven times cash flow. You might find some companies in that very same sector for some reasons or other trading at 12 times cash flow, 15 or even you know 35 times cash flow or infinite times cash flow. And I think it makes sense overtime to go long with cheapest multiple stocks short you know if you can find something, what you think is completely overvalued in same sector so one offsets the exposure of a sector and it works overtime. And we have plenty of examples where we make money in a long and short side within a given industry.