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Melvyn Teo From Komfie Manalo, Opalesque Asia:
A study by BNP Paribas Hedge Fund Centre at the Singapore Management University has found that hedge fund firms that manage several hedge funds tend to underperform compared to their counterparts that are managing less or only one hedge fund.
The findings, written by Melvyn Teo, Professor of Finance and Director, BNP Paribas Hedge Fund Centre at the Singapore Management University, show that hedge fund firms that launch several funds tend to underperform other firms by between 3 to 5% per year after adjusting for risk.
"These findings are strongest for firms offering funds that pursue many distinct strategies, invest in a variety of geographical regions, locate in a gamut of countries, and offer different base currencies. Our results allow fund investors to distinguish, ex-ante, firms that focus on delivering alpha from those that focus on gathering assets," Teo said in his study.
As a business entity, raising capital or assets is a fundamental function of any hedge funds. But while some hedge funds are focused in expanding their assets under management, there are some hedge funds that are geared towards investment performance.
Teo’s study distinguished these two groups of firms by analyzing the choices that firms make vis-à-vis the number of funds to launch, the strategies to pursue, the regions to invest in, as well as the number of ba...................... To view our full article Click here
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