Sat, Nov 28, 2015
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Operational due diligence is a source of alpha

Wednesday, February 15, 2012

Stephen Brown
Bailey McCann, Opalesque New York:

Stephen Brown is one of the world’s leading hedge fund scholars. He is a professor of finance at New York University’s Stern School of Business and was recently interviewed by Greg Despolberch for Opalesque TV. He shares new research that shows operational due diligence can be a form of alpha for funds.

He explains that when he started as a pension fund manager, few investors were focused on operational due diligence when they were looking to get involved in the hedge fund space. When he started to examine this trend he uncovered several macro trends that define how investors approach risk and operational risk in the hedge fund space. His findings show that while investors understand what operational risk is and how it differs from other types of risk, ways of measuring it were lacking.

"There are three major challenges to defining operational risk: number one - its multidimensional characteristic - people, systems can fail in many different ways. Number two is the data - getting information on operational characteristics is difficult. The third and most important issue is the distinction between operational risk and financial risk. My research has clearly shown that operational risk is more predictive of failure than is financial risk. Financial risk is a symptom rather than the disease, and the disease is operational risk," Brown said......................

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. Other Voices: Hedge fund marketing and the selling cycle[more]

    By Bruce Frumerman. How long is the selling cycle now? That’s a question my financial communications and sales marketing consulting firm has been asked on a regular basis by hedge fund firm owners and sales people, ever since we opened the doors to our firm in 1987 pre-crash. Wa

  2. People - Solus Alternative Asset Management adds chief strategist from BTIG[more]

    From Daniel Greenhaus joined hedge fund manager Solus Alternative Asset Management as managing director and chief strategist. He will work closely with Chris Bondy, Solus’ chief economist, managing director and executive vice president, said Chris Pucillo, CEO and chief investmen

  3. Opalesque Roundtable: Seeding deal terms can be onerous for hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Executives from fund of funds firms, family offices, a placement agent, a private equity firm, and an accounting firm gathered in Connecticut last month for the

  4. Opalesque Roundtable: Family offices flock to co-investment[more]

    Bailey McCann, Opalesque New York: Co-investments have been a hot topic for pension funds in recent years, as they try to move away from high fees and improve transparency. But now, family offices are more readily getting into the mix and establishing in-house deal teams, according to the delega

  5. More institutional investors invest in CTAs compared to last year despite dissatisfaction with performance[more]

    Benedicte Gravrand, Opalesque Geneva: "Despite a strong start to 2015 for CTAs in Q1, commodity market conditions have made return generation difficult for fund managers over much of the rest of the year to date," says Preqin’s November