Connecticut Spotlight: K2 Advisors’ Brooks Ritchey Delivers Keynote on Capital Fundraising Outlook

Industry veteran Brooks Ritchey, senior managing director and head of portfolio construction at K2 Advisors, anticipates that hedge funds will be more prominent in the next two years given the uncertainty surrounding stocks and bonds. He strongly encouraged managers starting out now to get up to speed on the ‘40 Act and UCITS regulations -- arguing those spaces will be high-growth areas going forward.

At EisnerAmper’s 2nd Connecticut event, which took place May 12 at L’Escale Restaurant in the Delamar Hotel in Greenwich and attracted nearly 100 alternative investment industry professionals, Ritchey inspired the audience with his keynote address on the “Capital Fundraising Outlook.”

“Here is the deal with hedge funds today,” Ritchey said. “They are growing like weeds, sprouting up everywhere.”

Ritchey elaborated that both institutional and retail investors have three options to choose from when it comes to allocating. If they like the markets and they are “risk-on” they can buy equities, emerging market debt or ETFs. If they don’t like the markets or are “risk-off” they should think about Treasuries. Finally, if investors aren’t sure about the direction equity and bond markets will move in the future, they can consider a third option, which he called “alpha” or hedge funds. He argued that hedge funds, by design, have low correlations to traditional assets, and have garnered interest from allocators unsure as to future market trends. 

Ritchey also argued that hedge funds tend to perform  better in rising rate environments as rising rates are typically accompanied by higher fundamental dispersion which creates trading opportunities.  He added that an anticipated normalization of interest rates during the next few years should serve as an additional tailwind for hedge funds/alpha. 

“There is a very strong relationship between the level of interest rates and the amount of alpha available to hedge fund managers to capture,” he said.  “We believe the market is setting up nicely for alternative strategies, including liquid alternatives.”

Brooks also informed the audience that in order for hedge funds to be approved by managers for K2 Advisors, they need to share their information including their VAR and beta underlying liquidity. He also emphasized the importance of knowing their performance on a daily basis.

After Ritchey shared his bullish outlook on hedge funds, attendees mingled over cocktails and hors d’oeuvres on the outdoor patio overlooking the Greenwich Harbor.

Stay tuned for EisnerAmper’s Financial Services Group next Connecticut event, coming this Fall.