“A little bit of humility has been a good thing,” Moessing said. “Access to high quality funds has definitely improved. Most hedge funds have eclipsed their high-water marks and that’s a good thing. There won’t be an exodus of talent (which had been feared). For Cambridge’s 855 clients worldwide, which include some of the major US endowments, the recommendation has generally been for a maintenance in allocations to hedge funds, although within the sector there has been an underweighting of pure absolute returns funds compared with equity long/short strategies. Eugene Snyman, Cambridge’s Australian head, said that private equity allocations were actually growing and there were some good opportunities at the moment.
“Secondaries investing is very attractive given some investors have an over-allocation (to PE),” he said. The discounts available to secondaries managers in their purchases of private equity stakes, meant that diversification benefits did not come at the expense of returns, according to Matthew Arkinstall, of Greenpark Capital. His firm, for instance, had an average of 20 investments in managers who in turn had an average of 20 underlying investments each. “You probably wouldn’t sell a secondary in this market unless you really had to,” he said. Meredith Jones, a managing director of Pertrac, said that when assessing the hedge fund sector, one could not tell whether a fund was good or bad based on a single average number. “The industry tries to boil down the universe to one benchmark,” she said. “Last year more than 20 different types of strategies comprised the top 5 per cent of fund performance.