New Highland long/short fund addresses problem of correlated markets, adviser Wilde says

By Aleesia Forni

Columbus, Ohio, Nov. 1 - Highland Funds Asset Management, LP's planned new fund could fill a valuable role for financial advisers who are struggling to diversify under current market conditions, according to Trevor Wilde, vice president and managing director of Wilde Wealth Management Group.

But Wilde also cautioned that his firm prefers to wait until a fund has built up some history before it invests.

Highland Funds announced earlier in the week that it has launched the Highland Alpha Trend Strategies Fund.

Explaining the thinking behind the fund, Eric Leake, chief investment officer at Anchor Capital management Group, Inc. and co-portfolio manager of the fund, said in a news release that "global equity markets have become more correlated" which has increased the need for both multi-strategy and a long/short approach to international investing.

Wilde concurred with this sentiment.

"Finding non-correlated assets is a lot harder than it used to be, it seems like," Wilde said.

Wilde's Scottsdale, Ariz.-based wealth management company has "definitely" seen more of a correlation between international and U.S. markets.

"[Funds like this] are going to help even the traditional buy-and-hold advisers take money invested but have stuff in there that's not correlated," Wilde said.

In the past, modern portfolios would see U.S. markets going up, while international markets would fall.

But, Wilde continued, the global marketplace "is not like it used to be."

According to Wilde, "now everything is in tandem."

"S&P goes down 2.5, the Dow is down 2.5, look overseas [and] everything's down 2.5," he said.

However, his company tends to stay away from new funds.

"We typically like to use funds that we have a little bit more of a track record on," Wilde said.

However, the idea of having a fund that can become more non-correlated by having the short ability "makes a lot of sense" to Wilde.

The strategy of this new fund will rotate investment positions primarily among country- and region-specific exchange-traded funds, and take long and short positions in broad equity indexes to vary the fund's net exposure over time, according to a Highland Funds press release.

"What they're attempting to accomplish is to take the highs and lows out of the volatility," Wilde said.

With a "high percentage" of a portfolio being long, funds like the Alpha Trend Strategies fund are able to "stay strong when things are going up," while short positions allow a smaller percentage of the portfolio to go up when the rest is down overall, "so you don't see as much volatility," Wilde told Prospect News.

With returns on the decline on an annualized basis since 2000, Wilde believes retail investors, who his company typically works with, are "stuck to the traditional ways of investing."

"I think investors are being forced to look for something outside the box," Wilde said. "I think we're at that point."

Wilde believes this heightened demand is the reasons for a surge in funds like this Alpha Trend Strategies fund.

"I think there's a demand out of the retail investors for stuff outside of the box," Wilde said. "Stuff that has not just the same old buy-and-hold story."

"You see tons of new funds being launched, and by and large they're not the typical equity fund," Wilde said. "They're commodities, they're long/short, they're short, [they are] all these different plays."

"They're being forced to come up and look for other pieces to the puzzle."

Though Wilde said the idea of a fund like this may be complex, he believes "the environment is going to call for it."

"The simplest viewpoint is looking for things outside of the box that have the ability to do okay even in a bad period of time," Wilde said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.