Tue, Oct 6, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Redemptions from low fee hedge funds could lead to 2%-3% drop in performance, says Melvyn Teo

Wednesday, April 21, 2010

From Sagar Chakraverty, Opalesque Asia:

“A lot of the low performance fee funds tend to have higher liquidity risks and this liquidity risk will translate into problems for investors when they attempt to pull money out of their fund.” This is what Melvyn Teo, associate professor of finance at Singapore Management University (SMU) shared with Opalesque’s founder Matthias Knab in a recent video interview (here).

Teo is involved in extensive research in finance and hedge funds, and also manages the BNP Paribas Hedge Fund Centre at the SMU. This centre runs seminar, conferences, and educational programs on hedge funds, and also conducts fund research.

In one of his recent research work, Teo looked into the veracity of the liquidity claim of hedge funds, especially those that raise gates and prevent investors from withdrawing money. He found that lots of the investments are fairly illiquid, and that there are huge deviations in the funds’ liquidity profile. He believes this liquidity exposure is related to agency problems, which arises when management and stockholders have conflicting ideas on how the company should be run.

Higher liquidity risk related to lower performance fees When investors pull money out from hedge funds that charge low performance fees, return of those funds tends to drop in the next month by 2% to 3%. This trend is stronger when stock market liquidit......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. U.S. hedge funds prepare for worst finish this year since 2008[more]

    Komfie Manalo, Opalesque Asia: U.S.-focused hedge funds are preparing for their worst year since the 2008 global financial crisis, following a series of letdown including the market sell-off in August and the sell-off in healthcare and biotechnology sectors last month, reported

  2. Investing - AQR Capital and Renaissance Technologies raise stakes in Southwest Airlines[more]

    From Marketrealist.com: In the previous part of this series, we saw how institutional investors played Southwest Airlines (LUV) in 2Q15. Now let’s move on to the trades executed by key hedge funds in Southwest Airlines over the same period. … Most of the hedge funds that had significant exposu

  3. DoubleLine’s Jeffrey Gundlach warns of another round of market shakedown[more]

    Komfie Manalo, Opalesque Asia: DoubleLine Capital co-founder Jeffrey Gundlach is painting a bleak future as he warned that the U.S. equity market and other risk markets, such as high-yield "junk" bonds, are facing another round of selling pressure. Gundlach said in an interview with

  4. A hedge fund strategy that seems to have fizzled[more]

    From Gulfnews.com: The hedge fund strategy that has attracted the most money this year is on course to cause some of the biggest losses for investors, in the latest example of the dangers of going with the crowd. Institutions and individuals have piled an estimated $20 billion (Dh73 billion) into ma

  5. Hedge fund Barnegat survives September’s market selloff[more]

    Komfie Manalo, Opalesque Asia: Bob Treue’s $679 million Barnegat Fund proved resilient after another month of market letdown as the hedge fund gained 2.2% last month, bringing its year-to-date gains to 2.8%. Treue said in his monthly report to i