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By Benedicte Gravrand, Opalesque London: Alexander Ineichen, well-known industry author, and managing director at UBS Global Asset Management, Zurich, reminds us that hedge funds did pretty well despite the year of reckoning, argues against the use of the term ‘alpha’ – and in favour of ‘asymmetric return,’ in his latest book -, and despite the gloomy short-term outlook, sees great opportunities ahead.
Mr. Ineichen sums up the state of affairs in the hedge fund world through investors’ disappointment; indeed, their expectations were not met, he said, as hedge funds were promoted on the basis of generating absolute returns in all market conditions. Over the last decade, based on industry benchmarks, hedge funds in the main, beat balanced portfolios, cash, bonds, equities, and inflation. But over the last 12 months, they did not generate absolute returns. So there is a mismatch between expectations and reality, which is causing redemptions primarily from private investors, directly or indirectly.
No alpha please
Mr. Ineichen has moved away in the last couple of years from trying to explain hedge funds using the term ‘alpha’. He argues that the term stems from the 1960s, and it is used to denote excess returns over a benchmark – however, hedge funds do not have a benchmark. One cannot really quantify their relative performance, as there is no unambiguous benchmark to compare performance against. ...................... To view our full article Click here
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