After more than three decades investing in hedge funds, Dixon Boardman, CEO and founder of Optima Asset Management and vice chairman of the Forbes Family Trust, is telling fellow investors to make room for hedge funds as an alternative to fixed income.
“Government bond yields are at rock bottom and remain vulnerable to increasing inflation,’ he said.
With combined Optima and Forbes Family Trust assets of $6.5 billion, Boardman is currently eyeing three opportunities – long/short specialists, Asia and market volatility.
Long short specialists with expertise in healthcare and biotech are well-positioned to benefit from secular trends due to COVID-19.
Secondly, growth in Asia appears to be a durable secular trend, according to Boardman. Regional specialists have the opportunity to take advantage of investment opportunities in China and India.
Last, but not least, is volatility. Ongoing volatility creates trading opportunities, so a well-diversified mix of macro and market neutral strategies have the potential to produce stable, high single-digit returns that are attractive relative to Treasury yields, he said.
His bullishness on hedge funds is not new of course. He said in a recent exclusive interview with Alternatives Watch, “I firmly believe that we will see hedge funds prove their worth once again.”
He is now urging investors to make room in their portfolios for alternative investments, because their ability to hedge can provide much needed downside protection and diversification during volatile times for equities.
While saying markets have entered an Age of Anxiety, Boardman says that this time may well be a golden age of hedge funds.
When he started hedge fund investing in the 1980s, there were only 600 hedge funds, of which only 100 had more than $100 million in capital. He told Alternatives Watch earlier this year that he suspects the trend of the large institutional firms dominating will continue, with smaller performance-oriented boutiques representing the other end of the spectrum.
As for Optima, the firm today offers a range of multi-manager and single manager funds, as well as customized programs for institutions and high-net-worth investors. Last year, Boardman’s business was acquired by FWM Holdings, the parent company of Forbes Family Trust.
He expects that the pandemic is forcing a critical inflection point for the markets, according to recent written comments by the legendary hedge fund investor. As monetary easing is underway alongside fiscal stimulus, Boardman believes that we are now in uncharted waters.
“COVID-19 is not the real issue – volatility and market disruption are,” said Boardman. “The pandemic may have been the catalyst for the most recent bout of volatility and market disruption, but throughout the past four decades of financial history, one key role for hedge funds has been to provide diversification for investors’ overall portfolios by dampening the downside.”
He added that investors to be careful about manager selection and have a keen understanding of their ability to manage risk.