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From Kirsten Bischoff, Opalesque New York:
It has been proven many times that individual investors attempting to enter and exit hedge funds with market timing strategies, inevitably lose money. Research (most recently published by Morningstar) shows that investors lag market trends. Nerves often cause them to sell low and buy high, and on average, they underperform underlying funds by approximately 1.5%. However, New York-based investment firm Spring Mountain Capital (SMC) has recently published a research paper that studies short-term market timing success, the active beta strategy that the firm uses when it invests into hedge fund products.
SMC manages a hedge fund as well as onshore and offshore funds of funds, and has recently been vocal about its support of smaller hedge funds. The firm, which holds approximately $1.8 billion in AUM and advisory assets as of June 21, 2011 said that the perception of large hedge funds holding less risk was flawed, and that large hedge funds have risks smaller ones do not, including the risk of "triggering a large redemption cycle with a strong negative feedback loop." (Source).
While that research focused on the decreased risk of small and mid-sized managers, their current research highlights the importance of being nimbl...................... To view our full article Click here
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