Type: Whitepaper

The recent period of aggressive rate hikes returned dispersion to stock and bond markets – and created an environment where hedge funds could shine. After four years of outperformance by hedge funds, we believe that it is time for investors to revisit this asset class and recognize the key role it plays in a diversified portfolio.

In this paper, we will examine the dynamics that have propelled hedge fund outperformance since the pandemic and place it in historical perspective; share how we construct hedge fund portfolios in ways that we believe allow us to capture the greatest benefit from this asset class; and give insights into our approach to the challenging task of manager selection.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

Great products and companies are founded and backed by great early-stage venture capital managers at times that may not correlate with broader financial market trends. Startup success is more dependent on factors specific to company founders and the VC investors who partner with them, including:

• the quality of the founding team
• the underlying fundamentals of its business, and
• the value-enhancing capabilities of its VC investors, who can maximize ownership and influence at company formation

How does an investor harness and potentially monetize the value created by founders and early-stage VC investors? We believe by manager selection, specifically the critical importance of:

• Differentiated access to managers we believe to be top tier
• Strong sourcing capabilities
• Deep due diligence
• Diversification by number of venture relationships

Investors who pause venture programs in a current challenging exit environment can miss opportunities for exposure to the innovation that early-stage venture managers are skilled at finding and harnessing.

The materials are being provided for informational purposes only and constitute neither an offer to sell nor a solicitation of an offer to buy securities. These materials also do not constitute investment, legal or tax advice. Opinions expressed herein are those of TIFF and are not a recommendation to buy or sell any securities.

Last year, we advised members on how to take advantage of rising short-term rates and harvest yield on cash holdings. Now, as this period of rapid and frequent rate hikes may be ending, we offer our guidance on how to navigate a phase of stable and possibly declining interest rates. Specifically, we share views on:

• Adding duration to lock in yield
• Mitigating the duration risk that comes with longer-term rates

We also review the four categories we use to group cash, determined by timing of expected need.

• Reserve funds provide the greatest opportunity to extend duration and lock in yield

We recommend a strategy to take advantage of the current rate environment using Reserve funds – even as we caution that members must have some degree of confidence that those funds will not need to be accessed prior to maturity of the recommended investments.

Rising uncertainty in markets have given investors pause on how they should balance their portfolios. 2022 brought with it one of the most aggressive rate hike environments in recent history and a war on the continent of Europe, causing both equities and fixed income to decline in tandem. Investors can be forgiven for being cautious in these environments.  

In this paper, we hope to outline some of the headwinds hedge funds have been facing and how these are now turning into tailwinds. We believe that these new dynamics make hedge funds an even more attractive investment to add dynamism to investor portfolios.

Download our new white paper: Wind of Change: A Favorable Environment for Hedge Funds 

Discover the potential of independent sponsors in private equity investments with our insightful white paper authored by Stephen Williams, CFA, and Brendon Parry, CFA.

Key Takeaways:

• The Hidden Gem of Lower Middle Market: Explore why the lower middle market, often overshadowed by larger firms, offers unique opportunities for private equity investors. Learn how we believe the lower middle market’s less competitive landscape, coupled with operational improvement potential, makes it an attractive space.
• Navigating Complexity: Understand TIFF’s approach to identifying, evaluating, and structuring transactions alongside independent sponsors.
• Case Study – Monogram Capital Partners: Gain valuable insights as we analyze TIFF’s long-standing partnership with Monogram Capital Partners. See how we believe investing alongside independent sponsors may lead to returns by acquiring and improving lower middle market businesses.

Download the paper now: Independent Sponsors: Rising Significance of the Lower Middle Market