Why Invest in Hedge Funds?

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Oct. 7 (Bloomberg) -- Aima Deputy CEO Christen Thomson discusses his investment ideas with Deirdre Bolton on Bloomberg Television's "Money Moves." (Source: Bloomberg)

Do investors really want the hedge in hedge funds?

They do.

The point about this is that the investor base has been changing significantly over the last few years.

Going back to before the crisis it was still the case of majority high net worth and if you are high net worth, you are probably interested in outside returns.

More than you are in preserving capital.

There you go.

So this is where you are able to take a rest.

But in the last few years the pensions, endowments, institutional investors, they are very cautious.

Essentially they want downside detection.

A lot of their portfolio -- it as a whole different group that is usually answerable to a much larger room of people, so it is a whole different dynamic.

And usually a whole chunk of their portfolio is annotated.

Remember 2008? remember the s&p being down?

They are quite interested in being with alternatives to get downside protection in there.

They probably also remember being locked up.

It was a peaceful experience for a lot of investors.

So, what do you see in that changing dynamic other than the group and the drivers seat?

What is basically happening is the hedge fund managers themselves are becoming much more institutionalized with the building of their infrastructure and seriousness over transparency and risk management , governance is what the pension is interested in.

If they want to get that institutional money, they need to be very, very serious in terms of their infrastructure.

This goes back to the 30's and almost have the industry started, a return to the future?

It is back to the future and the days of hedge funds.

If you can offer downside protection while grabbing the upside, that is attractive.

As an institution, you have more than 1000 funds, correct?

What are you hearing?

What are you seeing?

What is the tone like?

People are becoming more optimistic.

The last few years have become difficult but the industry has done well and if you look at the number of new attractive.

As an institution, you have more than 1000 funds, correct?

Allocations coming in, the total assets under management continues to rise with a record figure under asset management for the industry.

Do you think there are just too many hedge funds out there?

I do not think so.

If the investors want to allocate those hedge funds, there is a market for it.

Let the buyer beware, fair enough.

The deputy ceo joining us there

This text has been automatically generated. It may not be 100% accurate.

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