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Alternative Market Briefing

Commonfund: hedge funds are still good diversifiers for institutional portfolios

Thursday, January 09, 2014

Bailey McCann, Opalesque New York:

One of the more substantive critiques of hedge funds charges that hedge funds aren't the right fit for institutional portfolios because they represent in essence, repackaged and more expensive equities exposure doing little more than a higher risk mutual fund. Others like Dan McCrum at FT Alphaville argue that the value proposition for hedge fund managers is their individual market trading edge, and that institutions are unlikely to be able to continue to pick the best managers year over year. Today, Commonfund an investment advisory firm released a new white paper that examines those claims.

The paper, authored by Verne O. Sedlacek, President and CEO, Commonfund argues that hedge funds live up to their claims of offering more diversification and better performance than mutual funds over time. Active management of long-only strategies will only bridge part of the gap faced by pensions, endowments and other institutions he writes. Instead, significant allocations to alternative strategies are necessary to preserve intergenerational equity and thus fulfill the long-term missions and obligations of institutional investors. The paper offers up data showing that hedge fund manage......................

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