Best advisory team; Best HNWI/private client FoHF provider: Goldman Sachs Asset Management

AIMS' chief investment officer worries about a credit sell-off in 2016

Christoph Guenther, Goldman Sachs Asset Management Alternative Investments & Manager Selection

Hedge Funds Review European Fund of Hedge Funds Awards 2015

"The approach isn't: here's the menu, you have to choose from an appetiser, a main course and a desert," explains Kent Clark, chief investment officer of hedge fund strategies at Goldman Sachs Asset Management. The firm's Alternative Investments & Manager Selection (AIMS) unit was awarded best advisory team and best HNWI/private client fund of hedge funds (FoHF) provider at the Hedge Funds Review European Fund of Hedge Funds Awards.

AIMS differentiates itself by its ability to offer bespoke advice to investors, investors having different objectives and demands. "There's not a one-size-fits-all approach. The first and most important thing is it starts with the client. In that spirit, the idea is to be an extension of the client's in-house staff," says Clark. Typically, institutional investors looking for advisers have people with great knowledge of hedge funds and market dynamics, but would not have Goldman Sachs' wide resources.

Clark singles out the firm's breadth of staff and data in market risk and operational due diligence as examples. The AIMS segment has a team of more than 300 professionals, of whom more than 100 are hedge fund specialists.

The hedge fund advisory unit is part of a broader open-architecture platform of private equity, real estate, credit and long-only investments. It is therefore able to advise investors across a wider range of their portfolio.

Where did AIMS' client returns come from over the year? Equity long/short managers that AIMS favours performed well, with high returns from growth funds, European directional funds and funds with low exposure to stock markets – whether with balanced portfolios or market-neutral. Many favoured quantitative-based and merger arbitrage funds also outperformed.

"There was real alpha generated on the short side of many equity long/short portfolios," says Clark, adding that some notable equity funds did not perform well. "2015 has not been a year when having a concentrated portfolio was particularly helpful."

"One of the things that has been additive for us this year is investing in a more opportunistic and thematic way, where we are able to design very specific investments with managers," he says. Goldman's hedge fund team has been able to work with large managers to structure portfolios designed to take advantage of medium-term trends, for example in oil markets or in the pharmaceutical industry. The investment themes would have a 12 to 24 month life. "The idea is to identify themes across the portfolio with hedge fund managers and put those into our investors' portfolio," says Clark.

Clark is upbeat about equity market-neutral, merger arbitrage and fixed-income arbitrage, but cautions that credit funds will face many difficulties in 2016. "The big question mark is: how will liquidity in credit markets play out? Will there be attractive opportunities there?" he asks. It pays to have an opportunistic strategy in such environments.

One possible outcome next year is continued pain for energy companies as oil prices remain low, causing defaults that could become a good distressed opportunity. Were a wider credit sell-off and repricing to occur, with lower bond liquidity, managers with a longer investing horizon would be safest, Clark thinks.