SkyBridge Capital Founder and Managing Partner Anthony Scaramucci examines the role of hedge funds, and efforts to bring more individuals into the fold.
What do you feel are the most important technological and regulatory changes to have taken place on the marketplace in your career?
High speed trading, quant trading and the open access to information that the internet has provided are the most important technological changes in the marketplace I have seen during my career. The Jumpstart Our Business Startups (JOBS) Act has the potential to be the most important regulatory change as it has the ability to create a level playing field for investors.
What is the importance of hedge funds to the health of the marketplace?
Price discovery is what ultimately makes capital markets one of the healthiest examples of capitalism. Price discovery is central to what hedge funds do. They make the market more efficient and they add some creativity too.
What is the importance of hedge funds for participants in the marketplace – investors, both retail and institutional, and the fund managers themselves?
There are a number of different hedge fund strategies available to investors; some are risk enhancing, while others help to mitigate risk in an investor’s portfolio. If used appropriately, a diversified hedge fund portfolio may reduce overall portfolio volatility, offer lower correlation to traditional equity and bond portfolios and provide investors with access to a wider range of strategies than they might typically have. Mortgage investing, distressed debt investing and commodity/futures strategies are just some examples. A hedge fund portfolio has the potential to help investors smooth out their returns and compound capital at a higher rate over time.
What is the benefit of broadening out the base of hedge fund clients?
It is something that needs to be done. Why should alternative investments be the province of the ultra-wealthy or the large institution? There is more than $2 trillion in the space for good reason: smart money and competitive returns. Let’s give a broader set of investors a shot too.
Volumes are low, equities are struggling, what steps do you take in your portfolios to spread out and mitigate these challenges?
In the current environment we expect the risk on/risk off market behavior to continue and correlations across asset classes to remain high. For this reason, we have avoided strategies like long/short equity and global macro/CTA strategies that are challenged in this type of climate and have found attractive risk reward opportunities in mortgage and credit related strategies.
What is the top thing on your wish list – be it regulatory, technological, or something else?
We want to continue to expand our alternative product offering to a broader base of investors. We want to democratise the hedge fund industry. Access to the top managers should not be the exclusive domain of the privileged and wealthy. Assuming the JOBS Act is signed into law, we believe the industry will be able to communicate with and educate investors of all levels in a meaningful way.
What do you feel are the most important technological and regulatory changes to have taken place on the marketplace in your career?High speed trading, quant trading and the open access to information that the internet has provided are the most important technological changes in the marketplace I have seen during my career. The Jumpstart Our Business Startups (JOBS) Act has the potential to be the most important regulatory change as it has the ability to create a level playing field for investors.
What is the importance of hedge funds to the health of the marketplace?
Price discovery is what ultimately makes capital markets one of the healthiest examples of capitalism. Price discovery is central to what hedge funds do. They make the market more efficient and they add some creativity too.
What is the importance of hedge funds for participants in the marketplace – investors, both retail and institutional, and the fund managers themselves?
There are a number of different hedge fund strategies available to investors; some are risk enhancing, while others help to mitigate risk in an investor’s portfolio. If used appropriately, a diversified hedge fund portfolio may reduce overall portfolio volatility, offer lower correlation to traditional equity and bond portfolios and provide investors with access to a wider range of strategies than they might typically have. Mortgage investing, distressed debt investing and commodity/futures strategies are just some examples. A hedge fund portfolio has the potential to help investors smooth out their returns and compound capital at a higher rate over time.
What is the benefit of broadening out the base of hedge fund clients?
It is something that needs to be done. Why should alternative investments be the province of the ultra-wealthy or the large institution? There is more than $2 trillion in the space for good reason: smart money and competitive returns. Let’s give a broader set of investors a shot too.
Volumes are low, equities are struggling, what steps do you take in your portfolios to spread out and mitigate these challenges?
In the current environment we expect the risk on/risk off market behavior to continue and correlations across asset classes to remain high. For this reason, we have avoided strategies like long/short equity and global macro/CTA strategies that are challenged in this type of climate and have found attractive risk reward opportunities in mortgage and credit related strategies.
What is the top thing on your wish list – be it regulatory, technological, or something else?We want to continue to expand our alternative product offering to a broader base of investors. We want to democratise the hedge fund industry. Access to the top managers should not be the exclusive domain of the privileged and wealthy. Assuming the JOBS Act is signed into law, we believe the industry will be able to communicate with and educate investors of all levels in a meaningful way.
