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Stephen Brown From Kirsten Bischoff, Opalesque New York: Fund of hedge funds have had a rough time since the first stirrings of the financial crisis dried up liquidity in 2007 and 2008. With a business structure that did not lend itself to such extreme illiquidity, fund of funds have been the vehicle with the roughest comeback route in the industry. But the tide is turning. On Monday, TrimTabs and BarclayHedge reported that funds of hedge funds saw inflows of $3.8bn in May 2011, the fourth straight month of inflows, which may mean the tide has finally turned back in their favor.
But now that liquidity concerns are fading (and in their defense, many fund of hedge funds have made changes to their structures to better align their investment liquidity parameters with the expected liquidity needs of their investors), much of the appeal of fund of hedge funds lies in their ability to deliver the best hedge fund manager performance across a diverse range of strategies (or regions within a strategy, or types of manager, etc.).
A new paper, by Stephen J. Brown (David S. Loeb Professor of Finance at NYU Stern School of Business), Greg N. Gregoriou (Professor of Finance at State University of New York - Plattsburgh), and Razvan Pascalau (Assistant Professor of Economics State University of New York - Plattsburgh), entitled "Diversification in Funds of Hedge Funds: Is It Possible to Overdiversify?&q...................... To view our full article Click here
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