Late last month, Preqin spoke to Mustafa Jama, Head and CIO of Morgan Stanley Alternative Investment Partners (AIP) Fund of Hedge Funds, to find out how he viewed the development of the hedge fund asset class at this transitional phase in its history.
When asked what hedge fund strategies MSAIP will be concentrating on over the next 12 months, Jama revealed that MSAIP is splitting the hedge fund universe into liquid versus less liquid strategies. On the liquid side, MSAIP is focusing particularly on discretionary macro managers and long/short opportunistic managers. In the less liquid space, it will be focusing more on “plain vanilla” distressed managers. Jama believes that the distressed cycle is now entering the “sweet spot” for investment, with supply of distressed assets exceeding available capital, which will result in many attractive investment opportunities.
Jama feels that the fund of hedge funds business of AIP has emerged from the downturn strongly. Although down from its peak AUM in 2008 of $11.8 billion, its hedge fund assets are now at around $9.2 billion and growing thanks in the large part to its predominantly blue-chip investor base. The main thing he has learnt through the crisis has been “the supreme importance of liquidity…. [our] mantra at present is liquidity, liquidity, liquidity!”
For a full transcript of Preqin’s interview with Mustafa Jama please see the July edition of Hedge Fund Spotlight.