Capital protection structures squeeze managers' portfolios

Capital protection structures over fund of hedge funds are restricting the range of underlying investments, according to Christopher Aldous, chief executive officer at Absolute Fund Management.

Fund of funds managers are often required by banks, which have created the capital guarantee structure, to have daily mark-to-market value on their underlying investments to track fund performance closely.

This, Aldous said, could mean investing more heavily in liquid strategies and being more cautious

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