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Alternative Market Briefing

Dr. Meier: many fund of hedge funds managers are still not adequately equipped to execute proper selection and DD

Monday, March 05, 2012

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Prof. Dr. Peter Meier
Benedicte Gravrand, Opalesque Geneva:

Prof. Dr. Peter Meier heads the Centre for Alternative Investments & Risk Management at the Zurich University of Applied Sciences (Zhaw), as well as hedgegate, a free database and index for Swiss funds of hedge funds. He talked to Opalesque about hedge funds performance in 2011, guidelines for fund selection and investing in funds of hedge funds, and the state of the fund of hedge funds industry, globally and in Switzerland.

Question: Why was 2011 so difficult for hedge funds and for funds of hedge funds?

Answer: The year 2011 was a bogey year for financial markets. Only three years after the equity crash in 2008, in the aftermath of the credit crisis, 2011 brought losses for all risky asset classes, and even for bonds of downgraded governments like the Greece, Portugal etc.

Hedge funds are supposed to deliver absolute returns, and again they failed to achieve this proposition. From our model-based quantitative research we can detect many explanatory factors. On average, hedge funds have a correlation with equity markets and with emerging markets, and small-cap equities in particular. All equity factors contributed negatively to hedge fund returns. Global equity from developed market was down 8%, emerging markets and small caps 20%. Hedge fund re......................

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