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Alternative Market Briefing

95% of hedge fund performance is beta, 5% is alpha, says Dr. Lars Jaeger (3)

Monday, June 14, 2010

From Sagar Chakraverty, Opalesque Asia:

See Part One of the article here, and Part Two of the article here.

In the third part of the Opalesque video interview , the CEO of Alternative Beta Strategies at Zurich-based Partners Group, Dr. Lars Jaeger, spoke to the founder of Opalesque, Matthias Knab about the ratio of the alpha and the beta in hedge fund returns. He also shared his views on the risks involved for the investor in alternative beta and the capacity restriction for these strategies.

It is worth chasing beta rather than alpha? Are all hedge fund returns beta returns? To this Dr. Jaeger said, "Of course not! My claim is that the majority of hedge fund returns are beta returns. Of course there is an alpha in hedge funds, some alpha are there in equity markets."

The alpha is available but it is very limited. Jaeger believes that it takes persistent skill to generate alpha and managers' skill changes over time.

"It is probably much more worth focussing on the beta and getting that beta at much more attractive fee levels than chasing after the alpha that is dissipating very quickly, not persistent over ti......................

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