Sat, Feb 13, 2016
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   |   
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. Asia - Hedge fund manager Kyle Bass estimates China's foreign reserves below critical level[more]

    From Nasdaq.com: Investor Kyle Bass stepped up his attack on China's currency, arguing in an investor letter distributed Wednesday that the second-largest economy's foreign reserves are "already below a critical level." The comments mark the latest effort by hedge funds and other investors to raise

  2. Investing - Some hedge funds want to make subprime auto loans next big short, 11 hedge funds that are “all in” on the FANG stocks, Hedge funds short London luxury homes, Cynet raises $7 million from U.S. hedge fund[more]

    Some hedge funds want to make subprime auto loans next big short From Bloomberg.com: A group of hedge funds, convinced they have found the next Big Short, are looking to bet against bonds backed by subprime auto loans. Good luck finding a bank willing to do the trade. Money manage

  3. Investing - Hedge funds see selloff in European bank stocks as buying opportunity[more]

    From WSJ.com: The massive selloff in European bank stocks and bonds is overdone and presents a “phenomenal” buying opportunity, according to some of Europe’s top hedge-fund managers. Despite a 28% slump in European bank stocks this year, including a 38% fall in Deutsche Bank AG and a 34% drop in Soc

  4. Legal - Carlyle accused of fraud by ex-employee, Hedge funds win CDS breach of contract suit against Deutsche Bank, Hedge fund asks for OK on $27.5m Goldman CDO deal, SFO examines Barclays hedge fund profits[more]

    Carlyle accused of fraud by ex-employee From AI-CIO.com: A former portfolio manager claims he was fired for blowing the whistle on “crazy” and “irresponsible” investments. Carlyle Group has been sued by a former portfolio manager for one of its hedge funds, who accused the firm of “knowi

  5. Illiquid assets are all the rage for hedge funds[more]

    From Valuewalk.com: …Institutional investors are increasingly turning to illiquid assets and active management strategies to combat macroeconomic trends, anticipated market volatility and diverging monetary policy, according to a new survey by Blackrock. And this week, Bloomberg has reported that at