Australian superannuation funds don’t place much money with local hedge funds because their size may overwhelm the funds and some hedge funds lack the infrastructure to satisfy a fiduciary investor.
“It’s about ticking all the boxes when you’re a fiduciary,” says Richard Keary, chief executive of FRM (Australia) Ltd., a fund-of-funds hedge fund manager. “Many funds have key-person risk. They’re all about an individual.”
Australian hedge funds compare well with their global peers, says Keary.
In 2008 a typical global fund of hedge funds fell 25 per cent, he says. BT’s fund of Australian hedge funds dropped 8 per cent, he says.
Keary says many Australian hedge funds charge pre-financial crises fees that now seem expensive.
“Why? Because that’s what they need to do to keep their doors open,” he says.
He doesn’t think fund managers should trade on a stock exchange.
“It sharpens and makes more manifest agency risk,” says Keary.
Conexus Financial, the publisher of I&T News, is hosting a conference on hedge funds in Melbourne on September 20. Click here for more information