•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

Gustaf Bradshaw gustafbradshaw@bigfoot.com writes in IAI (INSTITUTIONAL ALTERNATIVE INVESTMENT, contact: Simon Osborn, osborn@ifiglobal.com), reprinted with permission.

Several standard reasons are typically given for using a fund of hedge funds manager when investors begin considering allocating to this alternative asset class. For example, the opaque nature of the hedge fund marketplace is such that it can be difficult to know about the existence of good hedge funds that are open to new assets at any point in time. And regular, reliable information on such managers can be sketchy or almost useless to the layman. Fund of hedge fund (FoHF) managers use proprietary databases and specialist analysts to follow the hedge fund universe closely and to assist in the selection of top-performing managers. In this area they clearly add value that cannot easily be created by either resource-constrained institutional or high net worth investors.

We checked FoF managers’ claims to add alpha through dynamic allocation However, FoHF managers also claim that they are able to add further value through portfolio construction techniques that dynamically vary allocations to different strategies. They thus justify fixed and performance-related fees that are seen as heavy when added to the significant fees already being charged by the underlying hedge funds. Little work has ye......................

To view our full article Click here