"In times like these when the stock market is unstable, hedge funds are an excellent option. However, most domestic hedge funds operate as private funds, making them less accessible. After managing private equity funds for 14 years, I have discovered overseas hedge funds that generate attractive revenue, and I have launched a public hedge fund based on this master fund."
Kim Tae-hyun, head of the Global Alternative Investment Team 2 at Korea Investment Trust Asset Management, met with ChosunBiz at the company's headquarters in Yeouido, Seoul, on the 12th and noted, "In Korea, public hedge funds have not been launched because their revenue is low. However, I have discovered overseas hedge funds that have high revenue and stability."
Korea Investment Trust Asset Management launched the public hedge fund "Korea Investment UBP Campbell Smart Alpha" on the 7th. This fund is a re-investment fund based on the fund from Union Bancaire Privée (UBP), a global asset management company.
The UBP fund, launched in 2020, utilizes a variety of investment assets and strategies, particularly among active funds. It invests in traditional assets such as stocks, bonds, and currencies, as well as new assets like financial derivatives. The cash held for the establishment and redemption of Korea Investment's re-investment fund, except for a portion, is entirely invested in the master fund.
The investment strategies of the UBP fund combine four strategies: "momentum," which utilizes stock price rise momentum; "short-term trading," which involves buying and selling assets within a short period; "systematic macro," which predicts the impact of economic indicators on asset markets; and "quantitative analysis," which assesses whether stock prices are overvalued or undervalued based on quantitative data.
He emphasized that the strategy prioritizes stability while also ensuring revenue. Most of the cash is invested in high-stability assets such as money market funds (MMFs) and short-term government bonds. The remaining cash is utilized for high-risk financial derivatives.
The definition of hedge funds is broad, but generally, it refers to funds that invest using various strategies such as long-short (simultaneously investing in rising and falling prices) and leverage, alongside traditional assets like stocks and currencies, as well as real estate and credit. Hedge funds seek to minimize losses during market downturns while maximizing revenue in uptrends to achieve a certain level of absolute returns.
According to Hedge Fund Research (HFR), a global hedge fund analysis firm, the average revenue of hedge funds worldwide last year was 9.83%. This is significantly lower compared to last year's S&P 500 index, which rose by 23.3%. However, conversely, this means that hedge funds can relatively preserve principal during downturns.
Domestic hedge funds primarily operate as private funds. Since a variety of investment strategies need to be employed, the regulatory environment favors private funds, making them more suitable. Consequently, hedge funds have predominantly catered to high-net-worth individuals and institutional investors.
Public hedge funds that general investors can invest in have been overlooked. This is because, in pursuit of stability, their revenue has not met expectations.
The biggest advantage of the UBP fund, according to Kim, is its high revenue. Launched in June 2020, the UBP fund has recorded an accumulated revenue of 60.82% and an annualized figure of 10.15%. UBP is known as an asset management company that uses systematic strategies based on statistical and mathematical theories. The systematic strategy automates investments based on rules and algorithms, using data to validate the performance of strategies and manage risks.
Kim emphasized that not only is the revenue of the UBP fund high, but it also effectively protects against downturns, which is the fundamental goal of hedge funds. He said, "During the unstable stock market this year from January to April, there were days with a maximum loss in the 1% range, but on a monthly basis, we generated revenues every time. Especially, during the market decline in March and the volatility in April, there were no losses on a monthly basis."
Kim noted, "The greatest value of a hedge fund comes from whether it can provide adequate diversification effects when invested over the long term." He explained that, in this respect, investment methods through multi-asset (assets) and multi-strategy are also noteworthy.
Domestic investors can directly join the UBP fund, but there are restrictions such as a minimum investment amount. If they invest in the UBP fund through Korea Investment Trust Asset Management, they have to pay additional fees but can invest without amount limitations.
The total fee for Korea Investment funds ranges from 0.59% to 1.29%. Class A, with a fee of 0.89%, is advantageous for long-term investments due to lower sales fees despite an upfront commission, while Class C is favorable for short-term investments with an upfront commission of 1.29%, about double the sales fee.