Hedge Funds World Japan 2006

I am in Japan at the moment at Hedge Funds World Japan 2006. While I speak later today, listening to other presentations has brought up a common discussion across the trading and hedge fund world yet again: single strategy v. multi-strategy.

For those looking to simply make money, let me break the jargon down. Single strategy simply means a trader trading one strategy (i.e. trend following) to make money. Multi-strategy is what the name says – an assortment of strategies coupled together (otherwise known as funds of funds).

The bias seems to be clearly toward multi-strategy managers or funds. Single style traders are out of favor with a fickle investment community and that is not a good thing. Why?

The more and more everyone chases multi-strategy approaches, the more and more they run away from the unique advantages of a single well thought strategy. The more everyone chases a panacea of multi-strategy, the more they end up all becoming the same benchmark. It ceases to become providing a unique advantage, but it becomes rather a chase to deliver exactly what everyone else is delivering in terms of risk and return.

The big money comes from big bold bets. The big money doesn’t come from hedging every bet every which way to Sunday.