From Vision to Allocation: Hedge Fund Portfolio Construction at Baystone

In March 2025, Lydia Goh worked on an investment memorandum for an upcoming board meeting, capping off months of late nights, dogged research and countless phone calls. The memo laid out her thoughts on the best path to build a hedge fund portfolio within her family’s single-family office (SFO), Baystone Capital (Baystone).

With approval to allocate up to 10%—or roughly US$90 million—of her SFO’s Assets Under Management (AUM) to hedge funds, Goh had already done what she thought would be the hard part: convince her Chief Information Officer and Baystone’s at-times conservative Board to diversify beyond public equities and bonds by adding an allocation to alternative assets. However, she now had a key decision to make: should she recommend that Baystone allocate directly to individual hedge fund managers, invest through a fund of hedge funds structure, or tap into multi-manager hedge fund platforms (the fastest growing segment of the industry)?

The case details the pros and cons of accessing hedge funds through the three different channels mentioned above, with a focus on the rapid emergence of the multi-manager hedge fund platforms (MMPs) over the past decade.

Through the case, students will be able to:

• Evaluate hedge fund investment channels by studying single-manager hedge funds, funds of funds, and MMPs across access, risk–return profiles, liquidity, fees, and governance.

• Assess hedge funds’ role in diversified institutional investment portfolios.

• Understand fee structures and performance incentives

• Assess hedge fund scalability and sustainability amidst challenges like rising fees, talent wars, rising interest rates, and diminishing alpha.

Inspection copies and teaching notes are available for university faculty. To receive an inspection copy and teaching note, please email cmpshop@smu.edu.sg with your registered faculty email ID and a link to your contact information on the faculty directory at your university as verification. An inspection copy and teaching note will then be sent to your faculty email account.

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SMU Faculty/Staff can download the case & teaching note on iNet with your SMU login ID & Password via the following links:

·      The Case (SMU-25-0029)

·      Teaching Note (SMU-25-0029TN)

·      Teaching Supplement (SMU-25-0029TS)

For purchase of the case and supplementary materials via The Case Centre, please access the following links:

·      The Case (SMU-25-0029)

·      Teaching Note (SMU-25-0029)

·      Teaching Supplement (SMU-25-0029)

For purchase of the case and supplementary materials via Harvard Business Publishing, please access the following links:

·      The Case (SMU-25-0029)

·      Teaching Note (SMU-25-0029)

·      Teaching Supplement (SMU-25-0029)