Sat, Apr 19, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Opalesque Exclusives – Funds of hedge funds’ liquidity constraints and fees generate negative alpha compared to l/s hedge funds

Monday, June 13, 2011

From Kirsten Bischoff, Opalesque New York:

In a white paper recently released by French firm Orion Financial Partners the firm found that long/short equity hedge funds notched much better performance than UCITS funds and specialty fund of hedge funds. The firm researched returns listed with Eurekahedge and found that "over the period 2005-2011…hedge funds have significantly outperformed UCITS funds and specialized fund of hedge funds respectively around +2.3% and +5.2% in annual terms." The strength of single manager l/s hedge funds was also on display as the firm’s research showed that they exhibited better Sharpe ratios and lower levels of extreme risk compared to the other vehicles.

The paper goes on to say, "More surprisingly, fund of funds posted a negative alpha over the estimation period," which the firm attributes to the additional fee layer, and the tighter liquidity constraints faced by fund of funds managers that have to deal with the lockup and redemption periods of the funds they invest into (which were largely related to the 2008 crisis.

Investors currently have three options for different types of vehicles through which to gain hedge fund exposure: hedge funds, UCITS funds and fund of funds. The paper concludes that While UCITS funds offer higher levels of liquidity, this factors into those managers’ ability to generate alph......................

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: Classic Auto Funds Limited (CAF) launches several car investing funds[more]

    Bailey McCann, Opalesque New York: A new trend in alternative alternatives is emerging - car appreciation funds. Classic Auto Funds Limited (CAF) is the first to market with several funds that make super elite luxury cars into real asset investments. As a result of growing overseas demand couple

  2. 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

  3. 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

  4. 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

  5. Opalesque Exclusive: Hedge fund replicators evolve[more]

    Bailey McCann, Opalesque New York: Hedge fund replicators as a group of products tend to get a bad rap from hedge fund managers who suggest that the best a replicator can offer is dynamic beta capture. A