Does anyone mind style drift?
When Nabil Debs consulted his investors about changing the Plutus fund's strategy, few opposed his proposal. "The majority of investors were receptive," he says. "Some of those who had allocated to us specifically for convertible exposure decided to leave (pulling money from the strategy, rather than placing it with other convert specialists who were determined to stick to their knitting). The rest, comfortable with the team at Plutus, retained their investments and adopted a 'wait and see' approach – which in hindsight worked well for them. We are driven by absolute returns and our investors expect that of us."
Style drift is no longer a dirty phrase. Investors are becoming less rigid with their mandates and allowing managers to shift styles in line with their competencies. One high net-worth individual who invests in hedge funds says: "There can be issues depending on the mandate. And you have to be mindful of the 'chasing rainbows effect', whereby managers are constantly adapting to market conditions but always playing catch-up with those who got there first. But as long as we are informed of what they are doing, we can make the decision about whether to stay or leave."