Fri, Mar 29, 2024
A A A
Welcome Guest
Free Trial RSS pod
Get FREE trial access to our award winning publications
Alternative Market Briefing

Other Voices: Not your father’s fund of hedge funds

Thursday, August 04, 2011

By Michael Bernstein, CFA, CAIA

If you ask ten funds of hedge fund (“FOHF”) managers to state whether they generate more of their returns from manager selection or strategy allocation, a couple of things will happen. The first is that all 10 will tell you it is very difficult to quantify how much comes from one vs. the other. This is true, but when hard pressed (i.e., when forced to fill out an RFP for a $250m mandate) most will cough up an answer. And that answer, in the overwhelming majority of cases, is that at least 2/3 of their return comes from manager selection, with strategy selection accounting for no more than 1/3.

Why is this the case? After all, don’t FOHF managers spend their days speaking with a huge range of hedge fund managers, arguably the most opinionated and talented investment professionals on the planet? Surely, in the course of their day-to-day interactions with these hedge fund managers, the FOHF managers must formulate some of their own opinions about the direction of the markets, don’t they?

The answer is, of course, yes. It would be a particularly weak-kneed FOHF manager that didn’t have a view on markets after conducting a round of monthly updates with the managers in his portfolio. The interesting question is, in select cases, how the FOHF manager utilizes this view or, in the majority of cases, why he does little to nothing with it.

There are a number of scenarios to consider.

The first is the FOHF manager who, as a ......................

To view our full article Click here

Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1