Four Ways To Gain Hedge Fund Exposure On The Public Market

Includes: AMG, CYS, FIG, GLRE
by: Mark Hines

Alternative asset class exposure and increased alpha are two big reasons many investors are demanding access to hedge funds. Traditionally restricted to accredited investors (i.e. people with huge amounts of money), there are increasing ways for the regular public to gain access to hedge funds. I've highlighted a few very interesting examples below:

Greenlight Capital (NASDAQ:GLRE) is a specialty property & casualty re-insurer established by hedge fund manager David Einhorn. GLRE has hundreds of millions of dollars of long term investment assets on its balance sheet (from the insurance premiums), and they invest it using value oriented hedge fund strategies. The strategies are different from other P&C re-insurers (who invest largely in fixed income and credit related securities), and are potentially much more lucrative. GLRE completed an IPO on May 24th, and is now available to the regular investing public.

Affiliated Managers Group (NYSE:AMG)
is an asset management company with equity investments in a variety of other investment companies, including AQR (one of the most successful hedge funds in the world). AQR has been considering an IPO, and since AMG owns an estimated 20-25% of AQR, an AQR IPO could be extremely lucrative to AMG shareholders.

Fortress Investment Group (NYSE:FIG) placed its IPO at $18.50 back in February, and was up to almost twice that by April. This company manages hedge funds, private equity funds, and publicly traded alternative investment vehicles.

Cypress Sharpridge (soon to be CYS) is a real estate investment trust founded by hedge fund manager Kevin Grant. Like many hedge funds, CYS will use large amounts of leverage to magnify its returns. When times are good this can be an amazing strategy, but when things go bad, the large amounts of leverage can cause things to go really bad (ever heard of Long Term Capital Management? how about Amaranth?).

Hedge fund exposure is entirely new for most ordinary investors, and it brings opportunities for very large returns. However, the increased return opportunities bring increased risk exposures. Personally, I look forward to following these companies over the coming months and years, and I am quite anxious to see how everything works out.