Convergent was an early adopter of incorporating certain types of alternative investments as a means of increasing diversification and lowering overall volatility of client portfolios.  In our experience, we have found that hedge fund managers have historically added significant risk-adjusted value over and above traditional active investment managers.  We believe they will continue to add such value to client portfolios, especially during periods of stress in the general markets, and thus can serve as particularly useful complements to a client’s traditional fixed income and equities allocations.

We believe that credit and arbitrage oriented hedge fund strategies provide an appropriate complement for a portfolio of traditional fixed income investments and equity. Additionally, these strategies have proven to have excellent diversification properties for dampening risk in the overall portfolio. These strategies, if properly implemented, have yielded the same volatility similar to fixed income strategies with returns that may be competitive with equities.

Convergent also uses higher volatility, higher expected return strategies (specifically, directional equity oriented funds) as a complement to portfolio equity allocations. This may be achieved through single-strategy managers or via funds-of-funds. As with the credit and arbitrage alternatives, a primary goal of equity-like alternative investments is to reduce correlation within the portfolio (thereby decreasing overall portfolio risk), and to improve the overall risk/return characteristics of the portfolio.

For clients of sufficient asset size, we may create customized funds-of-hedge funds via direct investment in multiple single-strategy managers. We tailor these investment allocations to create multi-manager portfolios designed to meet client-specific risk and return objectives.