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The Hedge Fund Strategies Group seeks to identify and invest with the best managers in the hedge fund industry. We conduct an in-depth fundamental analysis of all managers, perform proactive quantitative and qualitative research and continuously monitor and adhere to a disciplined exit strategy. We believe in active management, data-driven research and thorough due-diligence through a top-down, bottom-up approach. The team adheres to an established and rigorous investment process to determine the suitability of new investments and to monitor existing ones.
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The teams’ investment process consists of the following four major components:
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Manager Selection
To be able to build a successful multi-manager program, AIG Investments strives to ensure access to the best managers on a global basis. Manager selection is one of the most important aspects of our process for driving alpha. AIG Investments views hedge funds as a “talent pool” of managers, not an asset class. We believe that talent drives performance. We seek talented individuals who trade on an information edge and capitalize on inefficiencies in the market. A single strategy often includes multiple asset classes, cross-market trades and various trading techniques. Therefore, we are constantly searching for “alpha hunters” that can attain strong performance.
The AIG Investments Hedge Fund Strategies Group screens approximately 600 fund managers on an annual basis. Typically, only 10% of the managers based on the below criteria make it to the due diligence phase.
 For the approximate 10% of managers who pass the initial screening, we then conduct extensive quantitative and qualitative manager research, including onsite visits and analysis of performance and risk statistics. The few remaining managers are then visited by our “Manager Research Team” for evaluative meetings. Site visits involve extensive due diligence on the manager and his team, a thorough operational and risk management review and a performance analysis/quantitative review. Investment strategy, risk controls, track record, depth and quality of team and administration are evaluated. All “high priority managers,” who pass must then also be approved by our Manager Selection Committee. Once selected, we continue to proactively monitor all managers.
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Asset and Strategy Allocation
A properly structured multi-manager strategy may offer the potential for high absolute returns, while complementing traditional asset classes and improving portfolio risk/return optimization. The team combines a strategic “top-down” approach with a tactical “bottom-up” approach to analyse and determine optimal asset allocation. Additionally, the proposed allocations must then be approved by the nine senior-level members who comprise the Asset and Strategic Allocation Committee.
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Portfolio Construction
Construction of a client’s portfolio is determined by mixing the right amount of all the ingredients. Once the team has assessed the client’s objectives, determined the expected return and risk of the strategy and selected the approved manager, the team applies a “best of breed” screening through qualitative and quantitative analysis and determines the optimal multi-manager portfolio to meet the client’s needs.
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Risk Management
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“True analysis and management of risks is an art, not a science.”
– Robert Discolo, CFA, Head of Hedge Funds Strategies Group |
As an integral part of the AIG culture, we strongly believe that risk must be managed proactively rather than reactively. Therefore, we carefully track various risk factors for each strategy and underlying fund. The hedge team constantly measures risk through ongoing risk management and monitoring procedures, both qualitative and quantitative. Through diligent, thorough and consistent analysis of data and statistics, the team ensures quality and relative safety.
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