Anthony Limbrick, Chairman of the New Zealand Absolute Return Association, the organisation representing the New Zealand hedge fund industry says "it is the New Zealand Absolute Return Association position that retail investors should not be encouraged to invest directly in hedge funds.
They do not have the resources, the understanding, nor the experience to judge whether such an investment is appropriate for their investing needs."
Limbrick says "hedge funds have a place in a well-diversified investment portfolio. It is important to understand that many hedge fund products may actually reduce portfolio investment risk".
However Limbrick believes the optimal approach to introducing this investment style into a retail investor's portfolio is to use a reputable institution or funds management provider to create diversified exposures on the investors' behalf, thus reducing the impact of the failure of an individual manager or managers.
"As with any business sector, there are those who thrive, and those who fall by the wayside. In order to enjoy the benefits of hedge funds, but to reduce one's exposure to the collapse of isolated managers, or even more broad-based periods of market stress, it is important to have a well-diversified exposure run by an expert institutional team".
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