Family Money: Hedging Your Bets
Managing director of Westminster Portfolio Services (Thailand) Ltd.
I have previously written somewhat
disparagingly about hedge funds, but after three calendar years of falling
equities, hedge funds are increasingly looking like an attractive
alternative asset class, rather than a dangerous gamble into the unknown.
Hedge funds have long been viewed with suspicion –
particularly in light of the collapse of Long Term Capital Management in
1998 (which came close to bringing down Wall Street, having built up geared
exposure to the Russian market before its collapse). But institutional
investors are now starting to change their attitude, realising that hedge
funds can offer diversification away from the traditional asset classes of
equities, bonds and property. One large pension fund, for instance, now
holds 10% of its assets in hedge funds.
What is a hedge fund?
A hedge fund is basically an investment structure for
managing a collection of assets that can be invested in both cash and
derivative markets on a leveraged basis.
Unlike traditional equity fund or bond fund managers,
many hedge fund managers try to create value primarily through positions
that are uncorrelated to traditional capital markets. Instead, their focus
is on generating performance regardless of the direction of the markets.
Opportunities for growth come from two sources: an
ever-increasing world of assets and securities within which to trade, and a
wider array of trading strategies. These strategies are an advantage as, for
the most part, they can be implemented without the constraints of the common
regulation controls imposed on normal securities. For example, hedge fund
strategies may access both financial and commodity markets. They may then
take long, short, option or other positions in any of these markets.
Therefore, hedge funds provide unique risk and return
characteristics that are not accessible to traditional asset management
approaches. The hedge fund structure encompasses diversity that attempts to
create value by exploiting specific opportunities. Underlying investment
objectives vary tremendously among hedge fund managers.
Many star fund managers have set up their own hedge fund
boutiques, attracted by the possibility of speculating on price falls (going
short), as well as price rises (going long). This also gives them the
freedom to use varied strategies – not to mention the potential for
handsome performance fees.
Some large fund management houses have set up their own
hedge funds to keep managers from straying.
Earlier this year the Financial Services Authority (FSA)
looked into the regulation of hedge funds and came to the decision that
individual funds should not be marketed to private investors – which was
the status quo.
The hedge fund industry is happy that there should be
barriers to entry because managers do not want to see a boom in assets under
management. Not only could a cumbersome fund size hinder a manager’s
investment style, but the more hedge funds there are, the harder it would be
to find market anomalies to exploit.
Picking a portfolio of individual hedge funds is nigh on
impossible for individual investors. Not only that, most hedge funds have
high minimum investments – often starting at ฃ100,000 while SVM’s
well regarded Highlander fund requires at least ฃ250,000 – and many
of the best performing funds are now closed to new investors.
The principal arguments for including hedge funds in your
portfolio are that they can reduce portfolio volatility and improve your
overall returns. Because they use different strategies from conventional
funds, hedge funds often have a low correlation with equity or bond funds,
which can therefore reduce overall portfolio volatility. Hedge funds are not
correlated with equities because the former are valued according to their
net asset values (NAVs), whereas the latter are measured on the basis of
their future earnings. Even diverse equities are closely correlated because
their valuations are governed by the same macro issues: expectations about
the economy, inflation and interest rates.
By contrast, hedge funds are valued according to the
success of the strategies they use, which are designed to reduce market
exposure and take advantage of specific pricing anomalies.
Also, while traditional fund managers focus on relative
performance compared with a benchmark, whether it is rising or falling,
hedge fund managers always aim to deliver absolute returns. The flexibility
and variety of hedge fund strategies offer a useful alternative to
conventional long only funds.
It makes much more sense to use a fund of funds, which
offers not only diversification for a limited outlay, but also management
expertise. Funds of funds can often secure access to funds that have closed
to individual investors.
Fund of Hedge Funds
A common and popular type of hedge funds is the so-called
‘fund of hedge funds’. These simply invest not in just one but in
several hedge funds, and thus provide a diversified exposure to multiple
A fund of funds may, for example, be overweight in
certain strategies based on a particular outlook or using certain
specialized trading or analysis techniques. A typical fund of funds could
easily provide a spread of 8 to 10 different investment strategies and over
Managers usually charge a management fee as well as a
performance-based fee in addition to the normal underlying fund
administration fees. This exposes them to the accusation that hedge fund
management charges are high. That may be so - but as the charges are
generally related to performance, which has to be above average for the
managers to earn the higher fees, investors accept the higher charges in
return for a higher return on their investment.
However, the question of performance-related fees,
particularly in respect to a hedge fund of funds, is still much of an
argument. Consider the case whereby one of the fund holdings inside a fund
of hedge funds has done well. It thereby creates a fee based on performance.
Another holding in the fund of funds does not perform. In fact it counters
the growth of the former. The overall fund of funds will generate no return
but the performance-related fees due on the first holding will still have to
be paid. This creates a questionable scenario and one that is still under
While traditional investments derive the majority of
their return from the capital markets, many hedge fund strategies are less
affected by the direction of underlying capital markets. Hedge funds do
provide, without question, new opportunities for improving portfolio
performance in today’s environment of lower, and maybe unstable, returns
from equity markets. Given their generally low correlations to traditional
investments and the intent to ‘hedge’ market risk, hedge fund strategies
are worth considering alongside traditional investments.
Personal Directions: The Power of One
By Christina Dodd,
founder and managing director of Asia Training Associates
Sometimes in our lives we are confronted with periods of
being on our own. For many, this is a daunting experience as they can’t cope
with the prospect of having to be by themselves or having to do things by
themselves. We are by nature social animals and enjoy the company or indeed
need the company of others.
There are, however, individuals who find that this is not
the traumatic experience that many find it to be. Some people actually enjoy
being on their own, for a period of time being totally with oneself and
content in the very private emotion of it. It is a feeling that can invoke
great strength, control and power. It can bring forth comfort, pleasure and
deep satisfaction by the pure fact that you are collected in your own thoughts
On many occasions I have noticed people dining in a
restaurant alone. I am not talking about snacking a bowl of noodles on the
street but being in a real restaurant. Years ago (in my younger days) I would
never have thought of sitting in a restaurant by myself having a meal. This is
something I just would not be able to do because I would feel too self-
conscious of the fact that other people would be looking at me and wondering
why I was alone. After all this is something that we normally do in groups -
isn’t it? It comes with our family upbringing and social conditioning.
But it is quite an extraordinary feeling to actually dine
alone. I have come a long way since those days and I find myself frequently
doing this. Travelling also places one in the situation where you have no
alternative but to eat alone and this, I feel, is more of a bonus towards our
personal development. I must say I rather enjoy it at times but I know of many
who feel very ill at ease with the very thought of it and would much rather
order room service.
Just the other night I was in a restaurant and noticed a
young Thai man having a pleasant meal by himself. He had ordered a full meal -
not just a quick snack - and took his time over each course. He enjoyed a few
glasses of wine and was completely at ease with the situation. I thought to
myself that this was an appealing picture. Perhaps he was waiting for someone
who didn’t show - whatever the situation or circumstance - it was a nice
scene and I felt quite proud of him. He had an air of confidence about him and
he was very much his own person making a positive statement.
Normally we feel we shouldn’t indulge ourselves this way.
But I think we should sometimes because each of us deserves some indulgence in
our lives. We tend to overlook this part of our own well-being and it is wrong
to do so. Indulge, enjoy and celebrate that you are an individual and that
there is Power in Being One.
There are many instances that can hold true to the power of
one. Going on a journey alone, “without” the usual entourage of friends
and family, is an uplifting and learning experience. This is definitely an
activity that everyone should have to do at some stage in their lives. It is a
mind-opener to the real world and every parent should make it one of their
goals for their children. Every person, as soon as they can get enough money
together, should travel and travel alone for a while to have to call on their
own abilities to get them from point A to point B. I’m not saying that you
should only travel this way, but think about the value of such an experience
and the rewards it can bring you as you grow as an individual.
I have met some extraordinary people who have done just
this. They all say that the experience of being alone whilst travelling has
been so rewarding that they would never have done half the things they have
done had they been with a group. Being on their own was in fact the major
driving force behind their achievements.
Personal time or private time or whatever you like to call
it, is the most valuable time we can ever have. Without it, we do not
re-energize or re-charge the batteries! We don’t give ourselves the benefit
of sitting back and taking stock. We need to talk things out to ourselves and
think things through. It is so very important and whilst we are alone with our
thoughts and able to escape the influences around us for a while, it is
amazing how suddenly muddy water becomes crystal clear.
Think about the times you might spend on a bus or in a
train, or in a taxi - there on your own. What do you do with that time? Do you
immediately take out your mobile and make calls? That’s not necessarily a
bad thing as perhaps it could be productive or make you happy. Or maybe you
fall asleep. I see so many people fall asleep at the drop of a hat when they
are in buses. Perhaps they’ve been up at the crack of dawn or earlier, so
they are tired. But time like this can be your own private thinking time too.
It can be very settling and give you calm and control even though you are
surrounded by others.
Being with yourself in the private chambers of your own
mind is a time to cherish. No-one else can do your thinking for you. No-one
else knows your deep and inner thoughts. At night when you lie in bed just
before sleeping, these too are the most intimate moments you may have in your
own mind during your day when you own every single second. No-one can intrude
on this time as it is locked within you. Your mind knows the value of this
time and is naturally protective of it. Nurture the moments and periods in
life when you are embraced in your own thoughts. These are time of personal
growth and rejuvenation. There is, without a doubt, true greatness in the
Power of One.
Please don’t hesitate to contact me at Christina
[email protected] so ciates.com or visit our website should you wish
further information on our programs. Until next time, have a great week!
The Doctor's Consultation: One Helluva Joint!
by Dr. Iain Corness
Forgive me if I take a classic line from the classic film
Casablanca and destroy it forever, but here we go. What did the orthopaedic
surgeon say to the go-go dancer’s knee? “What’s a nice joint like you,
doing in a girl like this?”
And that bit of frivolity leads me into this week’s topic
- replacement joints, with hips and knees being the ones in particular. My
interest in these was rekindled by an invitation I received from the Zimmer
people (who make the prosthetic joints) to attend a function in Bangkok
discussing the latest techniques in Minimally Invasive Surgery (aka MIS), as
this relates to replacement hip and knee joints.
Now I must admit it is some time since I worked as an
assistant to an orthopod, and it was interesting to see the advances that have
been made. The rough-carpenter side of the business has been replaced by the
use of smarter, smaller, and more efficient tools. Now it is possible to
insert a replacement joint through a 5 cm incision, instead of the previous
opening, which required a goodly surgical slash of about 20-25 cm.
The good news for Thailand is that the Zimmer people have
teamed up with the Chulalongkorn Hospital in Bangkok to form the Chula-Zimmer
Institute to train Thai and foreign orthopaedic surgeons in the use of the
latest prosthetic joints and the Minimally Invasive Surgical techniques to put
them in place. In fact, seven bone surgeons from Thailand, plus colleagues
from India, Malaysia, Singapore and Taiwan have just finished learning the new
techniques at the Chula-Zimmer Institute. The Chulalongkorn Hospital is one of
the foremost teaching hospitals in Thailand.
The advances here should not be thought of as merely
cosmetic, as the shorter incision means less physical trauma, and many
patients are able to get out of bed on the day after the surgery. This means
shorter healing times and less pain.
In my day, we used to say that the only yardstick the
patient got as to whether the surgeon was competent or otherwise, was the
length of the scar. The shorter the scar, the more clever the surgeon. Modern
orthopaedic surgeons are rediscovering this old adage. You see, nothing’s
The Zimmer people have been in the business for some time,
beginning in 1927 in Indiana in the USA. They sell their replacement joints in
over 70 countries and the combined turn-over of the Zimmer owned companies
last year was 2.2 billion dollars. I had a close look at the new knees and
hips, and they really are beautiful items, complete with all the physical
movements needed for the joints to function correctly in the human body. The
hip being a ball and socket moves in every direction, while even the knee
needs an ability to have a few degrees of ‘twist’ to allow the recipient
to walk naturally.
For people with horrible old arthritic hips and knees, the
new joints and the new techniques are a godsend. About the only downside is
that you’ll probably set off the metal detectors at the airports!
I often get asked by people overseas if the standard of
medical treatment and expertise in Thailand is good enough, and many are
surprised when I say that the care they will receive at the top hospitals in
this country is every bit as good as they will receive in the top hospitals in
their own country, and in many specialties, Thai expertise is in front.
This might be the one question you’ve not been asked yet. I have been to
Chiang Mai a few times before, so I know it quite well, even if I don’t
go there for such activities normally associated with farangs. I usually
stay with a friend of mine and his Thai wife. Next month I will be back,
but this time accompanied by my daughter who would like to do some
sightseeing in Thailand. I have already planned some excursions, so
daytime is no problem. The problem could be that she would like to have a
night out once in a while in some disco or cafe, not accompanied by dad.
That’s all right with me of course as she’s 22 (but she looks a mere
18). The point is, that she would just like to have a good time, without
constantly being considered “game” by the entire male attendance. Do
such places exist in the Rose of the North? I can’t help her there, as
I’m not a party man myself. Someone mentioned the Blue Note as being
rather “safe” but are there others to your knowledge?
What a wonderful, but totally overprotective father you are! What happens
to your daughter when you are over here and she is over there? Goodness
me, she is 22 years old and more than able to take care of herself,
surely. I would also have thought that the friends that you stay with over
here would have been able to help you, but since you have asked, and the
young lady wants to go sightseeing, here are a few places for young ladies
to go in Thailand. The list is not comprehensive, as Hillary is a shy
person and not known to going out much at night, though champagne and
choccies can help drag me from the computer. In Pattaya there is the Hard
Rock Cafe, Shenanigans Pub, the Moon River Pub, the Green Bottle Pub, or
Henry J Bean’s. In Bangkok there are also Henry J Bean’s outlets (I do
like the one at the Amari Watergate, and Pierre-Andre Pelletier has such a
beautiful smile), Woodstock on the first floor up in Nana Plaza is also a
no hassle place with great hamburgers, but you do have to run the gauntlet
to get there. In Chiang Mai, in addition to the Blue Note, there are
places such as Riverside or Good View, great music and good food and the
Drunken Flower a small pub with good food and the Monkey Pub with acoustic
guitar, and Bubbles disco in Porn Ping Hotel is worth a try. However, it
really is time you let your little girl discover some places by herself.
If you are so worried, arrange for karate lessons!
Hillary, my deario,
I have discovered that wee Ying (same same Nit) also has a penchant for
choccy with her Bolly and this explains the disappearance of the Mars bar
destined for your oesophagus and beyond. She stuffed it down hers! And so,
I have devised a cunning plan to rid myself, in a kindly and humane way,
of the confusion caused by having identical twins in tow. I shall escort
both Nit and Ying (adorables, like yourself?) to the beach during the Loy
Kratong festivities and wait for them to go to sleep, which they
undoubtedly will after a few moments. I shall then place the one who is
snoring the loudest upon an inflated lilo and gently launch her out to
sea, with a candle and a baht or two. Prevailing winds and currents should
propel the girly-laden craft to the mouth of the might Mekong. Then all
that either Nit or Ying has to do is to paddle upstream to Nong Khai where
her mum and dad (simple fisherfolk) will be waiting and ready to net her.
One for them, one for me! Good idea, yes/no?
Oh my Deario! What a predicament! And you want me to tell you whether this
is a good idea or not? And this is while I am suffering from chocolate
withdrawals! My Petal, I cannot think while my blood chocolate levels are
so low, no matter what paltry excuse you have used this time as to why the
previously promised Mars bars have not arrived on my desk. I am also
interested to see that both the young ladies find your company so
enthralling that they instantly go to sleep. Mind you, perhaps they are
also suffering from withdrawals caused through more of your unfulfilled
promises. By the way, make sure you have the candles and incense sticks on
the Lilo before launching.
My girlfriend moved in to stay with me in my unit a month ago. Everything
is going well, and she is really nice to have around the place. We have
not had an angry word and I was feeling so happy until she told me that
her family wants to visit her. She says it isn’t a problem that we only
have a studio unit as they will sleep on the floor. Hillary, my friends
are telling me that once they’ve got inside they will never leave. What
do you think?
You have nothing to worry about, Petal, other than taking the buffalo poo
down in the elevator each morning. What do I think? I think you are a
mouse. It’s up to you to set the ground rules.
Camera Class: For great landscapes, lightly does it!
by Harry Flashman
was thumbing through a photography magazine the other day (courtesy of Ernie
Kuehnelt) and they had three pro photographers discussing how they go about
bringing back great landscapes (and seascapes). Two chaps were happy with one
great shot in 10 rolls of film (gasp!), while the other of the interviewed pros
said he expected every shot to be perfect and shot on 4x5 sheet film, but he
didn’t pop the shutter until he was sure he had every element in the shot
correct. Personally, I think he must hang about for a long time waiting.
Again, when the three were asked what the principal elements
were to get a “WOW” landscape, two of them went straight to the light
factor, citing the quality of light. Perhaps one of the greatest reasons your
landscapes fail is because you are not prepared to get up early enough to get
the cold morning light, or are prepared to hang around long enough to get the
warm sun just before it dips behind the horizon.
When asked about their extra gear they consider necessary to
be professional landscape photographers, two said a tripod and the third wanted
Blu-tack to keep his filters in place and a notebook and pen!
Looking at representative works from all three - and all were
excellent shots, by the way, the use of the tripod was obvious to the trained
eye. Soft ‘milky’ or frothy seas showing a long time exposure, or
‘filmy’ tree foliage were the giveaways, along with the incredible depth of
field which results from the aperture settings of around f22, minimum, allowing
depth of field sharpness all the way through the shot.
Another commonality was the film they used, with all of them
going for Fuji Velvia slide film. This is nominally rated at 50 ASA, but when I
have used it in the past I got the best results rating it at 37.5 ASA. Being
slide film, you should also remember to bracket the exposures about half a stop
either side of that indicated by the exposure meter.
One feature that was also evident, looking at their shots was
attention to foreground detail, as well as the important features further back
in the frame. All of them spent much time positioning the camera so that they
had something of interest. For example, a shot of sea with an island in the
background had beach rocks in the foreground. And all were in focus. That’s
the tiny aperture again. They will even use a Neutral Density filter as well as
the time exposure to keep that small aperture open longer. (A tip when using ND
filters - focus without the filter in place, lock the focus and then put the
filter on, otherwise it is too hard to see the individual items in the shot in
the darkened viewfinder.)
As far as the best piece of advice they were given, they went
for an alarm clock to get them out of bed early, so they did not miss the magic
light of early morning. (Being a night person, who has difficulties with early
mornings, is why I do not consider myself a good landscape photographer!)
To look at the final situation, from the words of the three
pro shooters, if you want to get good landscapes then you need a camera with
sharp lenses, get yourself a tripod - and use it to be able to have very slow
shutter speeds, and practice with slide film. Wait for the light to be right
(the more horizontal the sun’s rays, the better) and don’t bother if it is
all wrong. One guy waited six days to get the light right for one lakeside shot!
Make sure you have some interest in the foreground and get the deepest depth of
field that you can.
Do all of that and you will be bringing in those WOW
landscapes too! And for a change do try and use slide film. It’s harder to use
but the results are better.
Mrs. DoLittle’s Corner: It’s not size that matters...
It’s amazing how our perspective of things has changed
over the last thirty years.
It used to be that, to satisfy our material needs, we
wanted everything big! The bigger the better, the more impressive it became.
Big diamonds, big cars, big houses, big bank accounts, this was what
everyone yearned for, but only movie stars, millionaires and gangsters got.
know I’m just a tiny guy with a brain the size of a hazelnut, but I do
know a photographic opportunity when I see one! Tell me when to stop saying
Then along came the hippies who denied materialism and
went for “flower power”. The youth of Europe initiated a worldwide
‘break away’ from the old traditions, the industrialized systems and the
old wealth. They wanted to find meaning in life by going in the opposite
direction of their parents and the first step was to give everything up, to
have nothing. Now suddenly ‘little’ was ‘in’.
To have as little as possible and to want nothing but
“universal love” was the idea. Unfortunately a lot of that idealism went
up in smoke when they all got busted for drugs and went home with their
tails between their legs.
Then the ‘yuppies’ emerged. To be accepted it became
of matter of blending intelligence and sensitivity to become creatively
productive. The computer age came to full blossom as mechanisms were
refined. Now the tiniest gadget can drive the biggest machine. Our
perspective has arrived at a point where we have realized size really is
relevant. The smaller it is and the more functions it can perform, the more
valuable it becomes.
In relation to this, I’d like to tell you about a tiny
friend of mine whom I hold the greatest respect for, especially since he
once demonstrated to us all just how clever he is, despite his size. Buddy
is a 5-6 year old fruit bat who has been in captivity since he lost a wing
to a cat when he was just a few months old. He was well cared for by a
9-year-old boy for over a year before he came to Love Animal Sanctuary where
he soon became friendly with everyone. When we moved the animals to our new
location last year, we took Buddy along in a birdcage. We hung him under the
roof until we had a better place for him. Then one night a cat got up and
opened the door, grabbed Buddy in its mouth and took off with him into the
forest whilst the staff watched helplessly. Of course we all thought he was
gone forever. But, the next evening the caretaker heard a strange noise on
top of his roof. When he went out to have a look, there was Buddy perched
above his door looking right at him.
He held out his hands and Buddy jumped into them. Not a
scratch on him. Somehow he had managed to get away from the cat and find his
way home to safety. It was a miracle! Or was it just common bat
consciousness which the scientists haven’t discovered yet?
The morale of this story is: It’s not size that
matters, it’s how it performs that counts!