Olga Kletsky, MBA, Editor-in-Chief / CEO, Picking Alpha
Sohn Conference in London, the gathering of top international investors, has just acknowledged efficiency of “boring” investment strategies for recent economic situation. Why? Why these low risk, very cautious strategies, with so far very modest returns of Banks such as Canadian Banks and some other nations’ banks were recognized by the top pros whose mission is much more matching the words – No risk, no Gain! Well, looking at Canadian banks which were among of very few banks in the world who bravely and comparatively quietly withstood storms and crashes of the last crisis – many investors of course had learnt their lessons. So did the asset managers we are talking about. Not all of them – as we know some “Elephants” from Hedge Fund’s Industries preferred to close their doors to the customers transforming themselves into family enterprises. They couldn’t sacrifice habitual high returns of their funds to low risk strategies which are so much in demand now. While some others have chosen to address the challenge of these days.
Well, if Sohn Conference London – 2012 was to the large extent devoted to the search and discussions of post crisis strategies and solutions of how to increase their dramatically diminishing returns, how to attract investors, how to help them to build wealth in a new environment, then in 2013 it looks like everybody came with their solutions and strategies.
And the first distinction between the Hedge Funds we are accustomed to and those we met once more this time is that many CEOs were discussing the boring strategies as a way to gain … high returns today. So this time the challenge everybody faced – how to “marry” boring low risk strategies with returns significantly higher than those presented by the banks – found some interesting and unexpected solutions. Nobody of those who came this time to the Sohn Conference in London was going to give up the major advantage of Hedge Funds – delivering Alpha to their clients, while understanding that no potential investors are willing today to accept any high risk investment strategies appeared to be rather fertile for the Funds.
What is clear to us is that these Hedge Funds demolished the walls of their former working environment and went Global – they consider today any literally any market or industry, be it the South Korea (like choosing cheap and reliable stocks in this largely undervalued though quite predictable market), or Nordic countries, or Mexico, or Brazil. We have heard about “boring” Scandinavian banks and rapidly growing markets of luxury goods with stable potential of 5 – 10% price increase every year, about special financial markets in some countries and markets of privatized formerly National companies.
They are in search of undervalued markets and products, but what is also striking – more and more Asset Managers apply value investing approach, like examining fundamentals, talking to managers of the companies they are going to invest to, learning as much as possible about the companies before investing in them and not just applying technical analysis to make a decision.
Picking Alpha was and is the goal for Hedge Funds – what we were watching at the London Sohn Conference 2013 – some Funds have managed to find ways to deliver it (though probably not in a full strength as it was) while accepting more cautious, less risky strategies. One of these ideas of Andrew Weiss is in the feature video (watch here). Andrew Weiss is President and CIO of Weiss Asset Management, co-founder of Child Relief International, and Professor Emeritus of Economics at Boston University, he is in the top 1% of most highly cited economists. His research on credit markets with Joseph Stiglitz was prominently cited by the Nobel Prize committee.
And concluding our notes we can’t help saying that as it was proven by many years now, the Sohn Conference has become one of the most reputable events for best and brightest investors sharing their ideas for a very serious cause a fight against paediatric cancer. This year Sohn Conference London has two beneficiaries of the funds: The Royal Marsden Hospital and DKMS Delete Blood Cancer