As head of the Multi-alternative team at Thames River, he oversees the provider's efforts in the area of funds of hedge funds. He says that the pressure on the industry to both meet investor demands in the wake of the massive redemptions seen in 2008 as well as the emerging regulatory landscape since - regulators are intent, it seems, on pushing a much harder line on offshore hedge funds - is leading to many hedge fund providers looking to offer UCITS compliant products, which managers such as himself can buy into.
The key benefit for investors, Kinsey-Quick says, is that the absolute return targets implied by hedge fund strategies - despite the redemption pressures noted - have still borne fruit for investors. And they are likely to continue outperforming over time.
Kinsey-Quick notes that one of the key hedge fund indices, the CS Tremont HFI Long Short Equity index, has managed to outperform both global and UK equity indices since as far back as the collapse of alternative invstor Long Term Capital Management in the late 1990s. Since then there have been two global bear markets in equities, and events such as the credit crunch and 9/11 hitting investors, yet the index has continued to rise.
CS Tremont index versus equities, 10-yr
Source: Financial Express Analytics
The number of UK retail absolute return funds has grown substantially compared to five years ago. As the below chart on risk/reward shows, over the past three years investors would have seen much better returns compared with the FTSE All Share.
Source: Financial Express Analytics
However, it is also notable that hedge fund strategies such as long/short are spreading into other areas, again to serve up investors with an alternative way to play equity markets.
An example of a newer fund targeting UK investors this way is the Insynergy Absolute India fund run out of Singapore by managers from Indian firm Reliance's asset management arm. It is looking to combine growth opportunities available in that emerging market with better risk management thanks to use different strategies compliant with its UCITS status.
The Dublin-based fund does hold some of India's largest companies, such as State Bank of India, ICIC Bank, Jindal Steel & Power, and Infosys Technologies, but is predominantly focused on mid-cap opportunities.
Manager Ashish Mehta, who is co-head of India equity investments for Reliance in Singapore, says the short selling may take place for a number of key reasons. These include a deteriorating company position or sector; over owned or over valued stock; where management is perceived as unfriendly to investors; or where there is a foreseeable catalyst for a negative revaluation.
However, the portfolio can also use hedging techniques including selling its benchmark index, writing options on stock with no near term upside to enhance returns, or buying puts in the case of event driven bets.
"The market value of Indian equities currently is about $1trn out of $60trn globally. This share could grow by 40 per cent," Mehta notes. Foreign investment is important, but more impact will be felt by the fast growth in domestic savings," he says.
"Over three to five years the use of shorting can capture even more of that return," he adds.
Mehta stresses that this should predominantly be seen as a growth fund rather than an absolute return fund, albeit one that has other tools at its disposal.
AFI panellist Jonathan Wallis of Allenbridge says he has seen more interest in absolute return funds from clients.
"It's a developing area of the market, and will definitely be an important area for clients. Returns obviously depend on how well a fund is managed, but investors have the potential to get hedge fund type returns without the extra cost. We like the L&G Diversified Absolute Return, and have also used BlackRock," he says.
AFI panellist Ben Willis of Whitechurch says his firm has been using absolute return funds for some time.
"We dipped our toe in the water with the BlackRock fund, which did exactly as it was supposed to do. We then went on to back the Cazenove launch of absolute return. Companies have seen how well these funds have done in bringing in money, which kicked off the run of absolute return launches. Whether or not those companies have the skill to manage such a fund is another matter. Investors should go with groups which put a manager forward who has a proven track record of managing a hedge fund and giving returns in a difficult economic climate," Willis says.