Hedge fund reinvention is on the cards

From his office overlooking Geneva’s Jardin Anglais, Guy de Picciotto has a unique insight into the state of the hedge fund industry.

Earlier this year Union Bancaire Privée, the Swiss private bank of which he is chief executive, surpassed troubled compatriot UBS to become the largest allocator to the global hedge fund industry, according to a survey by InvestHedge, with $56.9bn (£32.2bn, €41.2bn) of assets under management. “In the first semester of this year there was still growth for hedge funds. Probably the next survey will be very different,” says Mr de Picciotto, the scion of UBP’s founder and chairman Edgar de Picciotto, hinting at waning desire among UBP’s own clients.

The younger Mr de Picciotto is a deep believer in the absolute return philosophy embedded at the heart of the hedge fund concept. Yet even he foresees a need for rapid re-invention across the $2,000bn industry, which is on course for its worst year on record. The typical fund has lost 9.6 per cent so far this year, according to the HFRX index of Chicago-based Hedge Fund Research, with the industry almost certain to underperform cash for the first calendar year since 2002.

“We have already changed 40 per cent of our list. In order to deliver performance you need another set of managers,” says Mr Picciotto, citing distressed assets, global macro and arbitrage as strategies that UBP believes can deliver in the next stage of the economic cycle.

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