Tue, Oct 21, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Commonfund issues new white paper - "Hedge Funds As Diversifiers In Institutional Portfolios"

Tuesday, August 13, 2013
Opalesque Industry Update - Commonfund today announced the release of the white paper, “Hedge Funds as Diversifiers in Institutional Portfolios” authored by members of its Hedge Fund Strategies Group, Kristofer Kwait, Managing Director, Head of Hedge Fund Research, John Delano, Director, and Justin Santana, Director. While investors allocate to hedge funds for a wide array of reasons, one of the primary roles of hedge funds is to diversify broad market risk. The authors explore four key factors driving the compelling value that hedge funds continue to offer institutional investors.

  1. Hedge funds are not a monolithic entity, nor a single and uniform investment class. They are highly diverse both among and within strategies.

  2. The growth of the hedge fund industry has led to an increased number of correlated managers, but it has also led to an increased number of uncorrelated managers. In fact, the single largest area of growth over time has been in the group of managers with the lowest percentage of their returns explained by those of the broad equity market. For a thoughtful, strategic investor, this diversity can provide the opportunity to attain portfolio diversification independent of market direction.

  3. Hedge funds provide significant alpha. The long-term, alpha-based case for hedge funds remains strong, despite recent declines in alpha coinciding with unusually adverse market conditions for security selection generally.

    * Although alpha is getting harder to find at the broad industry level, the best hedge funds still produce a substantial amount of alpha – manager selection is critical.

  4. In addition to significant alpha, hedge funds also offer a diverse array of systematic or market exposures.

As an investment class, hedge funds have historically demonstrated the ability to generate superior, risk-adjusted returns to the broad market. The authors posit that even in periods when hedge funds underperform the broad market, they still provide measurable value to a portfolio due to their diversifying properties. After all, if completely confident in the direction of the market, an investor would not need hedge funds or any other source of diversification.

The white paper may be downloaded by clicking here.

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   

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. Opalesque Exclusive: What's next for trend followers?[more]

    Bailey McCann, Opalesque New York: New research out from Ibbotson touches on a key debate happening among investors and fund managers, specifically whether long term trend followers can survive in the new

  2. Commodities - Oil wreaking havoc on small-cap energy stocks sliding 36%[more]

    From Bloomberg.com: Owning almost anything in the U.S. stock market has been a losing proposition since September. Owning smaller energy companies has been a catastrophe. Hercules Offshore Inc. and Resolute Energy Corp. are among 19 oil-and-gas equities in the Russell 2000 Index that lost more than

  3. Investing - Hedge funds favor equity long/short, Strategic bond managers hedge against further high yield sell-off[more]

    Hedge funds favor equity long/short From Securitieslendingtimes.com: Equity long/short strategies will generate good returns for hedge funds in the future, according to a panel at this year’s Risk Management Association Conference on Securities Lending in Naples, Florida. Panellists Sand

  4. Legal - Ex-hedge fund analyst weeps as judge hands down 5 year sentence, Former Columbus investment manager Steven P. Moore indicted on theft charges, SEBI confirms ban for Hong Kong hedge fund, SEC announces enforcement action against compliance officer[more]

    Ex-hedge fund analyst weeps as judge hands down 5 year sentence From Hereisthecity.com: An ex-hedge fund analyst was sentenced to 5 years in prison for his role in insider-trading scheme. The New York Post reports that former hedge fund analyst Matthew Teeple was sentenced Thursday to fiv

  5. Sparx optimistic about outlook for Japan[more]

    Benedicte Gravrand, Opalesque Geneva: According to SPARX, there are causes to be optimistic about the outlook for the Japanese market and the country's economy in general. Sparx Asset Management is a Tokyo-based asset manager, part of