03/10/2008

Welcome to the "Hedge-fund California"

Hello:

Just like The Eagles' hit song Hotel California, where "you can check out any time you like, but you can never leave", investors are finding it increasingly difficult to remove their principal from some hedge funds. Last week, Focus Capital, a $1 byn hedge fund, was forced to liquidate after losing an estimated 80% of its value. Getting twenty cents back per dollar invested does not a good investment make. The previous week, Peleton Partners failed, a few smaller funds had their assets seized, and other hedge funds have suspended redemptions (withdrawals) by investors.

These events continue to support the old saying that if something is too good to be true, it probably is not true.

We have not recommended this new breed of hedge funds. Rather, we continue to recommend traditional investments while following the standardized guidelines of asset allocation and diversification.

Do you have questions about your organizations endowment portfolio and/or its asset allocation? Please feel free to contact us for more information about portfolio reviews.

 

Terri G. Millson, CIMA, CIMC President

Ray Dicius, CSA, GEPC LPL Branch Manager