Finding the Right Hedge Fund for a Downturn

Many investors shy away from hedge funds for a variety of reasons, including opaqueness, blow-up risk (derivatives, leverage, short selling), etc. Yet, hedge funds are often recommended as a way to smooth portfolio volatility because they can provide positive returns when stock markets are down.

The solution may not be to disregard the asset class entirely but to find the few funds that can optimize a portfolio while avoiding most of the drawbacks. You can try to do this yourself but that’s a lot of work. Or you can consult with a financial advisor who has obtained the certified hedge fund specialist [CHFS] designation.

Most Canadians don’t know about the CHFS designation because the accreditation process only commenced in 2004 and there currently are just a hundred or so advisors who have passed the 10-week course offered twice a year by the Canadian chapter of the International Hedge Fund Association. I’m told that the exam is six hours long. See more about the course here.