Wed, Oct 1, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Commonfund paper looks at how equity rally has impacted manager selection

Thursday, August 28, 2014

Bailey McCann, Opalesque New York:

A new paper from Commonfund examines how the prolonged rally in equity markets could be impacting manager selection as it becomes harder to separate luck from skill in a portfolio. "Chasing Winners: the Appeal and the Risk" is authored by members of its Hedge Fund Strategies Group, Kristofer Kwait, Managing Director, Head of Hedge Fund Research, and John Delano, Director.

The paper shows that many hedge fund managers have benefited from outsized gains due to the extended broad market rise. Investors are often influenced strongly to select those hedge fund managers that have produced outsized recent performance. However, this strategy can work against investors in the long run since it is implicitly based on the manager’s ability to track market movements across investment environments -- even though evidence for this ability within the manager universe is not robust. This strategy also discounts alpha, which evidence suggests is a better measure for producing long-run results.

Data in the paper cautions investors away from chasing winners, as over the long term performance is not assured and is often attributable to specific market conditions over any real skill. Additionally, experiment results also suggest that alpha – in this case, return not accounted for by beta to the broad equity market, in......................

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. Socially responsible investments grow in demand, but performance questions persist[more]

    Komfie Manalo, Opalesque Asia: A study by financial services firm TIAA-CREF showed that interest in socially responsible investing (SRI) is increasing rapidly, but investors are still asking if investing in an SRI strategy

  2. Regulatory - Ireland launches structure for passporting loan origination funds within EU[more]

    From Asiaasset.com: The Irish Funds Industry Association (IFIA) has introduced new loan origination capabilities that will offer Asian managers and investors a new structure under the European Union’s (EU’s) Alternative Investment Fund Managers Directive (AIFMD). The new structure will allow the mar

  3. Europe - Ed Miliband's war on hedge funds could damage City of London[more]

    From Telegraph.co.uk: Ed Miliband’s plans to wage war on hedge funds could be potentially more damaging to the City of London than even the financial transaction tax (FTT), senior banking sources warned on Tuesday night. The Leader of the Opposition took aim at a number of industries as part of his

  4. News Briefs - SEC probes Pimco ETF over pricing irregularities, BEPs: Action plan released and UK first to adopt country-by-country reporting[more]

    SEC probes Pimco ETF over pricing irregularities The Securities and Exchange Commission is investigating Pimco’s pricing of exchange traded funds, the latest cloud to hang over the world’s largest bond manager, which has been dogged by poor performance and management infighting. Pimco on

  5. CalPERS’ move might alter hedge fund fees for good[more]

    Benedicte Gravrand, Opalesque Geneva: When CalPERS, the California Public Employees’ Retirement System, announced on September 15th that it was unwinding its hedge-fund portfolio, it was seen by many as is a significant blow to the sector’s appeal. The Fund is