Sun, Dec 21, 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

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. Investing - Big hedge funds win again on PetSmart, Riverbed, RBS sells real estate loans to hedge fund Cerberus, Talisman energy speculation: Which hedge funds could benefit?[more]

    Big hedge funds win again on PetSmart, Riverbed From CNBC.com: Another week, another set of wins for activist investors. On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale a

  2. Outlook - Hedge fund manager who remembers 1998 rout says prepare for pain, Bond guru Bill Gross predicts U.S. economic growth to dip to 2%[more]

    Hedge fund manager who remembers 1998 rout says prepare for pain From Bloomberg.com: Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s

  3. Investing - Hedge funds get boost from healthcare in 2014, Paulson & Co takes stake in Salix on heels of inventory issues[more]

    Hedge funds get boost from healthcare in 2014 From Valuewalk.com: The healthcare sector started the year on a turbulent note, as stocks of many major biotechnology companies were battered. However, most of the players in this sector have bounced back. The BarclayHedge Healthcare & Biotec

  4. Opalesque Exclusive: U.S. legal receivables fund launched in August[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Investing in asset-backed receivables is a strategy that has been an integral part of the alternative investment space within the overall fixed income asset c

  5. Comment - High fees and low performance hit hedge funds[more]

    From FT.com: Disenchantment over high fees and lackluster performance may finally be turning the tide against hedge funds, fresh data suggest. Despite generally weak returns since the global financial crisis, hedge funds have enjoyed positive net inflows every year since 2010. This helped assets und