Propelled by new software with a new algorithm that predicts whether the risks in hedge funds are low, medium or high, UBS securities is on a push to get advisors to include hedge funds in asset allocations for clients.
According to Investment News “those predictions are based on an algorithm that evaluates as many as three dozen variables intended to establish whether market, economic, liquidity and volatility risk factors support making allocations to hedge funds.”
Hedge funds have the ability to go both long and short in their portfolio, thereby hedging the market.
But they are often seen as risky play. With the unraveling of Bernie Madoff’s hedge fund fraud and the high fees sometimes associated with hedge funds, clients can be reluctant to use them.
UBS is pushing to change that.
I'm okay with hedge funds. They generally get a bad rap, but when used properly can help boost risk-adjusted returns. You just need to know the risks.