Wed, Apr 1, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
New Managers March 2013

Guest Article - Does size (of a hedge fund) matter?

What is the role of size in a hedge fund? For decades, academics and professionals have been trying to find the optimal ratio of assets to performance. We will try to animate the debate and to answer to this multiple-choice question in a simple and empirical way.

The main objective is to find out at which point a portfolio manager is too small with the risk of not having the right infrastructure and the necessary network, and when another portfolio manager is getting too big, and perhaps too rich, to still maintain the motivation needed to generate outsized performance rather than just charging heavy management commission.

One might have noticed in the recent Forbes ranking the list of estimated revenues of the world's biggest hedge funds managers. If some of them have clearly earned their money thanks to their trading or investing skills, others have just collected big management fees only thanks to their past relative to the performance they actually have generated. Those ones are "fat and happy" and live on their reputation. Others have made a choice to target institutional assets seeking to adapt their business and investment strategies to serve a broader range of investors. This is to the detriment of absolute performance and potentially changing investment style with a bigger allocation to liquid assets (indices, treasury bonds, sovereign currency G10, or even G3), or, on the contrary, to less liquid ones like private equity.

Some observers saw the legendary Moore Capital giving back capital to its clients under the simple but good reason that given the current market conditions (politically manipulated with chronicle issues and recurring sovereign risk), the size becomes a handicap to navigate efficiently within very noisy markets without a stable trend.

......................

To view our full article please login

This article was published in Opalesque's New Managers a top-down monthly analysis, news and research publication on the global emerging manager space.
New Managers
New Managers
New Managers

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. Other Voices: Does the hedge fund industry benefit society?[more]

    This article was authored by Don Steinbrugge, Chairman of Agecroft Partners, a US-based global consulting and third party marketing firm for hedge funds. It is no secret that the hedge fund industry is viewed negatively by a la

  2. Opalesque Roundtable: Emerging managers should avoid chasing 'institutional unicorns'[more]

    Bailey McCann, Opalesque New York: For managers looking to raise a new fund after the crisis, marketing efforts will need to be significantly different, according to delegates at the recent Opalesque Texas Roundtable. "Most of the smaller managers come to the whole fund-raising and marketing

  3. Cohen's private investments deliver strong 7.5% gain in Q1[more]

    From Reuters.com: Billionaire Steven A. Cohen's investments gained 7.5 percent in the first three months of 2015, according to a person familiar with the numbers, helping the former hedge fund manager extend his string of market-beating returns. Cohen's Point72 Asset Management, which invests

  4. Hedge fund launches fall again, $1bn funds found to outperform even smaller hedge funds[more]

    Komfie Manalo, Opalesque Asia: The number of new hedge fund launches fell again in 2014, the third consecutive year of decline, while fund liquidations saw their first drop since 2010, according to the latest HFR Market Microstructure Industry Report released by industry data provider HFR. Acc

  5. Opalesque Exclusive: Cyber security and hedge funds: increased awareness, Part One[more]

    Benedicte Gravrand, Opalesque Geneva: If you look at the recent cybersecurity news from Bloomberg, hackers are frightening the people: they steal photos and threaten to expose them, they can break into ATMs, they ha

 

banner