"We have specialists that provide different kinds of diversification-by investment, by time, by buying short or long," Yusko says. "For instance, we have global and domestic specialists, long and short investments in health care or technology, long and short in commodities and specialists in particular large-cap or small-cap investments and distressed credit.

"If we spend three weeks investigating a company and it turns out to be a bad company, we can buy it and sell short, using it to our advantage. For most other firms, they would have just wasted three weeks of their time investigating a bad company," he says.

"They always say, small fortunes come from concentration," Yusko says, "but large fortunes are built from small fortunes with diversification, which we can provide. We are opportunistic and have strategic targets for each asset class and we rebalance regularly. Other people eventually end up buying what they wish they would have bought, but by then it's too late. At Morgan Creek, we buy what we have faith in."

Universities and endowments have been doing this for 50 years, but only recently has this model become available to high-net-worth investors and institutions that are smaller than Harvard and Yale. However, many smaller investors are not able to build or maintain an investment portfolio that allocates significant positions to hedge funds or illiquid strategies and managers on their own.

Worthington adds, "We can provide the skill sets to combine investments that others do not put together in a single vehicle. It is another way of providing balanced diversification for high-net-worth investors."

Since Worthington joined Hatteras in 2007, the firm has launched other investment vehicles with a focus on hedge funds and private equity.

"Since 2008, everyone learned to look at the industry differently. Everyone with a retirement investment learned they need to be more careful to prevent their retirement from disappearing, and they need to better understand their liquidity needs," Worthington says. "Over the next decade, I believe Hatteras will allocate more to hedge funds, including private real estate, commodities and others, to create greater returns for the investor."

Following the initial multi-strategy fund launch in 2004, the firm began branding itself to offer additional joint ventures managed by Hatteras Capital Investment Management.

Among its newer offerings, Hatteras manages a global private equity fund of funds, a diversified fund of hedge fund strategies in a daily liquid, daily valued mutual fund structure, and a late-stage venture capital fund. Hatteras cannot comment on its private funds, but according to SEC filings, the global private equity fund offering is unique in its allocation.
About 40% of the fund will be dedicated to India and China, where the private equity market is growing rapidly (see sidebar). Only 25% of the allocation will be to the U.S.  For this offering, Hatteras partnered with Capvent, a private equity specialist based in Zurich, with three offices in India.

The dislocation of 2008 caused advisors and investors to search for liquidity even within the hedge fund space. Hatteras responded by purchasing ALPHX, a mutual fund that offers hedge fund strategies and hedge fund managers in a daily liquid format, from Alternative Investment Partners (AIP) in mid-2009. Hatteras officers believe the demand for liquid alternative funds will continue to grow and that this portion of Hatteras' business will grow in tandem with this trend.