Mon, May 1, 2017
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Not your father’s fund of hedge funds

Thursday, August 04, 2011

By Michael Bernstein, CFA, CAIA

If you ask ten funds of hedge fund (“FOHF”) managers to state whether they generate more of their returns from manager selection or strategy allocation, a couple of things will happen. The first is that all 10 will tell you it is very difficult to quantify how much comes from one vs. the other. This is true, but when hard pressed (i.e., when forced to fill out an RFP for a $250m mandate) most will cough up an answer. And that answer, in the overwhelming majority of cases, is that at least 2/3 of their return comes from manager selection, with strategy selection accounting for no more than 1/3.

Why is this the case? After all, don’t FOHF managers spend their days speaking with a huge range of hedge fund managers, arguably the most opinionated and talented investment professionals on the planet? Surely, in the course of their day-to-day interactions with these hedge fund managers, the FOHF managers must formulate some of their own opinions about the direction of the markets, don’t they?

The answer is, of course, yes. It would be a particularly weak-kneed FOHF manager that didn’t have a view on markets after conducting a round of monthly updates with the managers in his portfolio. The interesting question is, in select cases, how the FOHF manager utilizes this view or, in the majority of cases, why he does little to nothing with it.

There are a number of scenarios to consider.

The first is the FOHF manager who, as a ......................

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. Opalesque Exclusive: Ex-Man manager combines sustainable investing with AI/ML[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Dr. Richard Bateson, quant fund manager and physicist, has recently

  2. Other Voices: "Winner-take-all" dynamics and hedge fund investing[more]

    A growing stream of thinking in microeconomics is the concept of "winner-take-all" dynamics. The idea seems simple. A combination of networking economics and classic economies of scale creates situations where there are just a few dominant firms or economic agents who are able to capture significant

  3. Investing - How Chipotle's comeback attracted big data robots and value investors alike[more]

    From Forbes.com: When William Ackman's ailing hedge fund Pershing Square Capital Management bet $1 billion on shares in Chipotle Mexican Grill beginning in July 2016, the stakes couldn't have been higher. Pershing Square was reeling from what would eventually be a near $4 billion loss in drugmaker V

  4. Gondor Capital sees challenges ahead for financial markets as two hedge funds post strong gains in Q1[more]

    Komfie Manalo, Opalesque Asia: Vincent Au, portfolio manager of New York-based hedge fund firm Gondor Capital Management believes that the remaining of the year would be challenging for the financial markets even as his two hedge funds maintain

  5. Service Providers - Colemore launches fee tracking service for limited partners[more]

    Following Colmore's successful launch in January 2017, the firm has announced the launch of FAIR.. FAIR is designed to help private equity investors independently validate fees and incentives charged by underlying managers, saving time and providing an extra level of comfort. There is a glob