Hedge fund primer
Hedge funds are a type of alternative investment that offer investors the opportunity to invest in a variety of focused strategies. Hedge funds typically have lower legal and regulatory constraints than other alternative investments, such as private equity, venture capital, and real estate. They also typically have more flexible mandates that permit the use of shorting and derivatives, aggressive investment styles, access to leverage, and disparate fee structures.
Real estate hedge fund strategies
Real estate investing is another popular type of alternative investment that primarily offers investors access to tax-advantaged and inflation-hedged current income. Real estate may also offer investors a relatively uncorrelated return against equities and bonds.
Real estate hedge funds offer investors a way to access active exposure to real estate opportunities. Real estate hedge funds may offer investors a better risk-adjusted return, better access to liquidity, and more talented investment professionals than private equity real estate opportunities. Real estate hedge funds typically have broader mandates than private equity real estate firms and may invest directly in real estate private equity and debt opportunities, invest indirectly in publicly traded equity and debt, or invest in derivatives of underlying real estate.
Real estate hedge fund considerations:
- Risk: Hedge funds offer a wide range of risk levels. Prospective investors should assess their risk tolerance and ensure the hedge fund’s investment and risk-management approach aligns with their objectives.
- Expertise/talent: Prospective investors should investigate a hedge fund manager’s track record, experience and expertise, and investment philosophy for alignment with their real estate hedge fund investing goals.
- Fee structure: Hedge funds typically charge a management fee and incentive fee. Prospective investors should evaluate the hedge fund’s fee structure to ensure alignment. High fees must be justified against sufficient alpha and portfolio diversification benefits.
- Liquidity: Real estate hedge funds typically offer more liquidity than other real estate alternative investment types. Prospective investors should still diligence their liquidity needs against the hedge fund’s liquidity terms and constraints.
Silver Beech Capital Management
Silver Beech Capital Management is a concentrated, fundamentals-driven New York hedge fund that invests in publicly traded North American companies. Silver Beech employs an intrinsic value-based investment strategy targeting high-quality but misunderstood businesses and value-oriented special situations with a tilt towards the financials, real estate, and consumer sectors.
