Sentinel Trust has a long history investing in alternative investments, including hedge funds, by partnering with institutional-quality managers.
Properly used, hedge funds may reduce risk and raise returns for wealthy families’ portfolios by providing additional diversification from traditional equity and fixed income investments.
Hedge Funds are private pools of capital that typically invest in a variety of securities and can make bets as to whether those securities will rise or fall in price. The flexibility offered allows hedge fund managers to take advantage of opportunities that present themselves in all kinds of markets.
Hedge fund investments range from relatively low risk to extremely high risk and are therefore best utilized with advice from sophisticated advisors. Examples of hedge fund strategies include:
- Long/short managers take a position in an asset expected to appreciate in value (“long”) while also taking a position in an asset expected to decline and structuring the trade in a way that benefits from the decline (“short”). The long and short positions reduce exposure to broad market movements, which lowers risk in a diversified portfolio.
- Event-driven managers analyze corporate activities like bankruptcies or mergers to make investments that will benefit from a particular event. These investments tend to be time-limited and less correlated with broad market or sector movements.
- Global Macro managers forecast global macroeconomic changes such as growth rates and inflation, and make investments to benefit from those changes using a variety of securities, including stocks, bonds, currencies, and derivatives.
- Activist managers buy large positions of public company stock to influence management to adopt changes the hedge fund manager believes will make the company more valuable.
- Relative value managers exploit differences in pricing between similar assets on the assumption that the market will force their prices to converge.
We select managers, and increase or decrease allocations among them, consistent with our strategic and tactical views of the markets, our valuation discipline, and the tax-sensitive needs of our clients.