Thu, Apr 17, 2014
A A A
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

Banner
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. Opalesque Exclusive: European stock-picking fund up 19% YTD, bets on small caps’ high cash level[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Here is a European long/short equity fund that has been beating the odds since its 2008 inception by employing its own investment model, frequent company visits

  2. CTAs could face new challenges in a rising rates environment[more]

    Bailey McCann, Opalesque New York: CTAs have taken a beating performance wise lately, and asset flows reports show that investors aren't sticking around to see how the movie ends. Now, a new white paper from Roy Niederhoffer and Coen Weddepohl notes that as interest rates start to tick back u

  3. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  4. Opalesque TV: First Trust Advisors launches liquid alternatives platform[more]

    Bailey McCann, Opalesque New York: First Trust Advisors is launching a new liquid alternatives platform aimed at building on the companies existing alternative ETFs offering by adding hedged mutual funds. Senior Portfolio Managers Rob Guttschow and John Gambla recently sat down in an

  5. Commodities – Popular value fund manager David Iben bets on Russia, gold,[more]

    From Reuters.com: With large bets on Russia and North American gold miners, one of the best performing stock pickers in the wake of the 2008 financial crisis is back with a new fund that reflects his deep aversion to following the crowd. In the Kopernik Global All-Cap Fund, David Iben is follo