Thu, Mar 28, 2024
A A A
Welcome Guest
Free Trial RSS pod
Get FREE trial access to our award winning publications
Industry Updates

Study: Multi-manager liquid alts funds underperform traditional fund of funds

Monday, January 25, 2016
Opalesque Industry Update - A new report out from New York-based investment consultant Beachhead Capital Management shows that alternative multi-manager mutual funds underperform the HFRI Fund of Funds Index over time. Proponents of this type of liquid alternative often counter with the idea that lower fund fees make up for any losses on the performance side, but the data there is weak as well.

The study looked at 32 funds that fit the alternative multi-manager mutual fund model for its study group. While the report authors note that the sample size too small to be definitively conclusive, the findings are interesting. In their analysis, Beachhead took an equally weighted portfolio of funds that have full year performance data and calculate the net of fee return. Those numbers were compared with the HFRI Fund of Funds Index. According to the data, "in every year, AMMFs underperformed the HFRIFOF index – on average by over 200 bps."

Based on the level of performance drag if mutual funds lose 200 bps or more, saving 100 bps on fees won't make up the difference. When broken down even further, according to the paper, hedge funds have returned on average 7.5% per year since 2012, whereas the liquid alts group has returned 4.5%. 2012 is the key year for comparison, as that is when the bulk of the mutual fund products were launched. Investors in the liquid products also paid 2.6% in fees and expenses on average - or almost half of the total return of the fund.

The full report is available on Beachhead's website.

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
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