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  • Hilltop Fund Management: How to Get the Most Out of Hedge Funds


    Rory Hills from Hilltop Fund Management, a fund of hedge fund management firm at the marcus evans Elite Summit 2011, on how to profit from FoHF investments.

    Interview with: Rory Hills, Partner, Hilltop Fund Management


    “Institutional investors need to understand the difference between hedged and absolute returns,” advises Rory Hills, Partner, Hilltop Fund Management. “The problem with fund of hedge funds (FoHF) lies in the way the model has been implemented and not the product itself,” he adds. From a fund management firm attending the marcus evans Elite Summit 2011, taking place in Montreux, Switzerland, 25 - 27 May, Hills shares his thoughts on what investors should look for in FoHF managers and how the industry can deliver the return profile people are looking for.

    What should private wealth managers look for in fund of hedge fund managers?

    Rory Hills: I would highlight three areas to focus on: first, try and understand who within their organisation attends the first meeting with a hedge fund manager; too many are over-reliant on junior analysts, who simply do not have the market experience to evaluate managers. You want to find FoHFs where the founders of the business are still the people out there meeting managers (and cross check this with the hedge funds they are meeting if you can).

    Second, be wary of FoHFs who place too much emphasis on making macro calls; they do not have the liquidity to change their mind when they need to. Better to find a FoHF with a proven ability to identify high quality managers running strategies that can deliver in all environments (which the best managers in most strategies can).

    And third, focus on FoHFs investing in smaller and mid-sized managers, which are nimble and able to operate in areas the larger hedge funds cannot. It is a self-serving myth that bigger is better in the hedge fund world; we think smaller is better.

    Could you explain your point about “hedged” versus “absolute” returns?

    Rory Hills: FoHFs are structurally set up to deliver hedged returns and not absolute returns.  This is a distinction which has become blurred over the past few years as the hedge fund industry has become known as the “absolute return” industry, when in fact there are two distinct products and a third if you include CTAs.

    The “hedged return” profile seeks to capture as much upside of a bull market as possible, whilst limiting the downside of a bear market. An “absolute return” strategy aims to deliver non to low-correlation returns, regardless of the environment and it is this which many hedge fund investors are looking for. I do not have a problem with (good) hedged return strategies but they need to be sold as such and they will likely correlate to traditional benchmarks. After all, how can investors size their investment into hedge funds, or know what to substitute it for, if they have no idea how these new investments are going to correlate to their current positions? Understanding how a product is likely to correlate in different environments is key.

    What about fees?

    Rory Hills: To me, it does not seem right for FoHF managers to collect an incentive fee every year; one year is not long enough to evaluate a strategy. This results in a short-term mindset that is out of sync with clients’ investment timeframes. I would challenge the industry to have a fee structure where performance fees are paid after a three or five year investment period.

    Sarin Kouyoumdjian-Gurunlian
    Press Manager
    marcus evans, Summits Division
    Tel: + 357 22 849 313

    About the Elite Summit 2011

    This unique forum will take place at the Fairmont Le Montreux Palace, Montreux, Switzerland, 25 - 27 May 2011. Offering much more than any conference, seminar or trade show, this exclusive meeting will bring together esteemed wealth management industry thought leaders and solution providers to a highly focused and interactive networking event. The summit addresses the most current wealth management trends, and provides attendees with fresh perspectives on adapting effectively to global changes and opportunities to sustain, grow and preserve family wealth.

    For more information please send an email to info@marcusevanscy.com or visit the event website at www.elitesummit.com 

    marcus evans group - investment sector portal

    Please note that the summit is a closed business event and the number of participants strictly limited.

    About marcus evans Summits

    marcus evans Summits are high level business forums for the world’s leading decision-makers to meet, learn and discuss strategies and solutions. Held at exclusive locations around the world, these events provide attendees with a unique opportunity to individually tailor their schedules of keynote presentations, think tanks, seminars and one-to-one business meetings. For more information, please visit www.marcusevans.com

    About Hilltop Fund Management LLP

    Hilltop pursues a truly differentiated approach to FoHF investing. Focused on managers nimble enough to exploit specific, niche investment opportunities, Hilltop creates portfolios of funds where the degree of inter-fund correlation is extremely low, even in moments of financial crisis. Hilltop believes this will enable it to deliver strong, positive returns in any 12-month period with low correlation to traditional benchmarks.


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