Asset classes such as foreign exchange, gold, oil and industrial commodities are beginning to have specific and identifiable hedging roles in portfolios, beyond the broad brush “diversification”.

That is a far cry from three years ago, when investors spread money around asset classes and managers in the vague hope that broad enough diversification would help them make money in all market conditions, or at least preserve wealth.

That notion disappeared during the financial crisis, along with around $12 trillion of market value.

Investors still want exposure to emerging markets, but they fear leveraged investments in volatile equities markets, where they were badly burned during the crash.

But, their hunger for growth unabated, this time investors are plumping for emerging markets bonds.

They are also looking to protect themselves against the vagaries of the economy.

They are hedging against inflation by taking exposure to industrial commodities and oil.

As for gold, a traditional hedge against inflation, they see it now as protection against possible deflation or the continued devaluation of major currencies.

For the same reason, many are also buying baskets of emerging markets currencies such as the

This broad diversification may not save them if markets again all slump in tandem.

But this time at least they know what they are doing, and why they are doing it.

On the fringes of the Reuters Global Private Banking Summit, Banco Santander executives said they had been involved in six to eight large real estate transactions including the sale of a Miami marina in this year.

In another deal, a Mexican client snapped up a chunk of distressed commercial real estate in Spain from a seller seeking to cut leverage. The properties were returning more than 6 percent in cash flows, a healthy spread over the buyer’s 4 percent borrowing costs.

More recently Santander private banking unit Banif assisted a client in the sale of the Valderrama golf course in Spain to Australian golfing legend Greg Norman.

Valderrama was the site of the first ever Ryder Cup to be held outside the United States or the UK in 1997, when Europe’s top golfers defeated their U.S archrivals.

Diversified cash flows were the major attraction of this type of property, said a Banif executive, citing membership fees to the golf club and rentals of the club’s real estate and subscriptions to related services.

 “There is still demand for high level tourism,” he said.

“It’s just a cautious asset for scared investors,” he grumbled as he waved a chart showing prices had once again hit an all-time high.

Some anecdotal evidence suggests he may have a point.

Bankers at this week’s Reuters Private Banking Summit said investors were loading up on gold to the tune of some 7 to 10 percent of their portfolios.

The traditional motive of hedging against inflation was conspicuous by its absence.

The wealthy were buying gold because they were worried by the possibility of deflation, by a collapsing dollar or by the threat of prolonged financial turmoil.

Many were getting exposure through gold-backed exchange traded funds or gold stocks related stocks.

And one couple even bought a tonne of the stuff and drove off with it.

“If we did have a global financial meltdown, what do these people think they could actually do with the gold,” said the investment advisor.

As for the pair with a tonne of gold — worth well over $40 million at current prices — let’s hope they hid it somewhere safe.

The service providers including fund auditors, custodians and prime brokers, have drawn in their horns since the early years of the millennium when they were often the main sponsors of cocktails and dinners at large hedge fund events.

They were conspicuous by their near absence at GAIM 2009, as were the free-for-all champagne receptions, gala dinners and so on, as money drained from the industry after hedge funds suffered their worst ever losses in the crisis year of 2008.

One of the big four auditors, for example, brought 22 staff in 2008, but just four in 2009.

But service providers were back in force this year, although they kept a far lower profile than before the crisis. For example, this year they preferred to sponsor low key dinners and talk business with clients real and prospective, rather than lavishing expensive freebies on all and sundry as in years past.

And at the cocktail receptions that were on offer, drinks tended to run out after an hour or two (this was not the fault of the correspondent).

It was a far cry form the fondly-remembered Bear Stearns Monaco beachfront party of 2007, a Lucullan bash worthy of the last days of Pompeii.

That was Bear’s last GAIM before the tottering bank was forced into a shotgun wedding with JPMorgan in 2008 in a last ditch effort to save it from bankruptcy. Bear not only ran hedge funds of its own — its two subprime debt funds went down the tubes in spectacular fashion in early 2008 — but it was also one of the biggest industry’s biggest prime brokerages, which provide trade execution for funds.

It seems other service providers don’t want to tempt fate for fear of meeting the same end.

The industry has been less flamboyant since then, and while the expense of a champagne cocktail reception for five hundred conference-goers would be but a small drop in the marketing budget for most service providers, they prefer to project a more sober image these days.

The reason for the poor morning turnout is quite simple. A good proportion of the attendees didn’t make it to bed until at least 3.30 a.m. on the first full conference day.

Sass, Monaco’s favourite drinking hole was so packed the previous evening that it was impossible to get anywhere near the bar.

The crowd was still thick enough to force the few passers by off the pavement if they didn’t want to get held up by the heaving human traffic jam. A stark contrast to 2009 when access to the bar area was relatively clear and even the hard core drinkers began making their way back to their hotels by 1 a.m.

Some attendees protested it was last night’s unseasonal torrent of rain that kept them hemmed in at the bar, but it didn’t prevent them from hopping into taxis to make their way to Jimmyz, the most famous of the principality’s nightspots.

At Jimmyz back in 2009, the atmosphere and the numbers were more what one might expect in an obscure exhibition at a remote museum or at the funeral of someone with few friends.

This year, the club was buzzing.

That might also explain why many of the delegates drifting into the conference later in the morning were wearing sunglasses.

 The massive storage depot just outside the city was practically devoid of goods containers.

    These containers are usually stacked four high in periods of normal economic activity, although their number fell noticeably during the recession from which we have now supposedly emerged.

But now there was bare space on the ground.

This clear indication of economic woe does not only afflict Italy, however. Over the past several years, the majority of the containers passing through the Milan depot have belonged to Hanjin, China Shipping, Hapag Lloyd (China) and other Chinese shippers.

The recession has undoubtedly impacted the sale of Chinese goods in Italy, and probably in other countries served by the Milan depot as well, such as Switzerland, just an hour’s train ride to the north, with a continuing impact on Chinese exports.

The government has stepped in briskly to lend a helping hand.

 ”The Chinese state has barged in with heavy investment to compensate the fall off in export demand, but I doubt this
massive fiscal stimulus can be maintained in the longer term,” said Julius Baer economist Janwillem Acket.

While Acket believes this author’s fear of a double-dip recession is over-pessimistic, he said he expects to see a
“bumpy” pattern in the global economic recovery.

 Yet there is good reason for fearing the double dip.

 While it is true that corporate profitability has improved since the darkest days of the recession, this has mainly been
achieved by cost cutting, mainly through the axing of jobs.

Which reduces the possibility of a consumer-led recovery, at least in the world’s developed economies.

 Also there is scant evidence of improvement in capital spending, while on the other hand there are plenty of
indications that banks and households are holding on to their available liquidity.

 So while the atmosphere among the world’s most revered financial leaders meeting in the Swiss resort of Davos this week may be significantly more upbeat than last year, Milan’s deserted cargo depots paint a somewhat less rosy picture.

If you ask them why, they will generally answer that, post Lehman, having multiple prime brokers is seen as a fundamental part of managing counterparty risk.

However, many hedge funds, especially the high-frequency traders who have come under the spotlight recently, already used multiple prime brokers before the collapse of Lehman.

But two years ago, hardly any of them mentioned counter-party risk. It was almost a non-issue, since virtually no one was expecting a major bank to go down the tubes.

At that time, the most common explanation for having multiple prime brokers was that “we don’t want one broker to know all our trades”.

But why? There is by law a Chinese wall, or a series of them, between a bank’s prime brokerage and its proprietary trading desk.

Surely the hedge funds know that? So the question of the bank’s prop desk potentially front running their trades should not arise, should it?

So why were, and are, some hedge funds anxious to ensure no single prime broker can keep tabs on all their trades? Are they worried about Chinese walls being porous?

This year’s GAIM conference was far smaller than the three previous summer events, with fewer organized events, no sponsored gala dinner and restricted cocktail sessions where two or three bar staff struggled to satisfy hundreds of thirsty conference-goers

The fact was duly noted, initially with some concern, by many of the investors and asset managers, several of them grumbling about the limited amount of liquid refreshment available to slake a healthy thirst worked up in the searing Monaco sun.

In the end, however, investors were left impressed by the quality of their numerous meetings with asset managers over the three-day event. Managers too said they were impressed by the incisiveness of investor questions.

The 500 or so investors and managers went home with new ideas, fresh plans and new found respect for each other.

Maybe that was because they finally got a chance to meet.

Investors grabbed the opportunity to meet managers directly. In past years, they had spent much of the conference trying to avoid the capital introduction people, who in turn spent their time trying to hunt down investors.

This year the cap intro people, marketers and salespeople were conspicuous by their absence, as were the hordes of banking executives who usually show up.

Among the service providers, only PricewaterhouseCoopers came team-handed, although it seems that fewer than the 18 PwC registrants turned up.

While organizers ICBI must have been slightly disappointed by the turn out – 800 people had registered for the event, after all – they couldn’t have failed to notice that those who had turned up were keen to get on with things.

In past years many attendees went home with impressive suntans, this year relatively few of them spent more than a little time by the swimming pool or on the beach, as was evident from their generally pallid hue on the final conference day.

Jimmy’z nightclub, normally packed during GAIM, did no such roaring trade this year.

Usually, the final events of the conference are poorly attended, with 30 or fewer conference-goers turning up to the farewell drinks sessions, many sloping off earlier because, they said, they needed “to return to work”.

This year, there was no need to leave early, because they were already at work. At the final drinks gathering – again a Spartan affair, where beer and wine looked destined to run out very quickly – more than 100 people showed up, and discussions continued.

Few, if any, expressed disappointment over this year’s GAIM. Most of them headed home on Thursday evening, exhausted but satisfied with what they had achieved.

Attendance numbers are down at this year’s Global Alternative Investment Management conference in Monaco. Fewer hedge fund salespeople, fewer investors, fewer stands.

It is not really such a surprise, and not only because the attendee list was visibly shorter this year than in 2008. Of the around 800 registered visitors, perhaps 500 have turned up.

On the eve of GAIM last year, when perhaps 900 of the 1200 registered actually made an appearance, the streets of Monte Carlo were filled with hedge fund types drinking cocktails at one of the town’s many chic bars. On Monday, those bars were largely deserted.

A cursory glance into the investors-only pre-conference cocktail and dinners also indicated numbers were down sharply.

Not that this is a surprise of course. We have, after all, just come through a financial crisis – or are still in the middle of one – and funds, fund service providers and investors are obviously being more careful with their money.

Gone are the hordes of attractively-dressed marketing staff, business development personnel and salespeople from the largest hedge funds. In their stead, a handful of executives from the same funds, with a long list of investors they want to meet.

There are other signs too that the crisis is biting, even in Monaco.

One conference attendee said he had decided a couple of months ago to book himself and his wife in at one of Monte Carlo’s more swanky hotels, but had initially delayed booking, only to remember when the conference was just days away.

“I thought I’d left it too late and would either not get a room or have to pay through the nose,” he said. “I was really surprised to find the price was 30 percent lower than when I first thought about booking.”

Even the owners of Monaco’s swankiest shops seemed a little more downbeat than I remembered them last year. As I passed the Bentley shop, I noticed the owner looked positively whipped.

And I could have sworn the prices of the Bentleys were much lower than last year, too.