This article examines two approaches that many institutions consider when investing in hedge funds: multi-strategy hedge funds and funds of hedge funds. Since data at the index level is limited for these strategies a number of underlying drivers of risk and return are analyzed. The ability to rapidly move capital between strategies is also examined. Further the differences between the business models of multi-strategy managers and funds of funds and the potential impact for investors are explored. The results show that manager selection dominates strategy allocation for hedge funds.
This paper introduces a number of quantitative tools for manager selection, due diligence, and the ongoing monitoring of hedge funds that the authors believe to be particularly suited to the nature of hedge fund returns. The analyses introduced typically address information relevant to the entire distribution function, as compared to the more conventional practice of utilizing lower moments such as mean returns and standard deviations.
Over the past 20 years, distressed debt investing has become increasingly popular. The distressed debt market has increased in size – private equity firms and hedge funds have become key players.
The ’40 Act alternatives market has recently become one of the most widely talked-about new developments for the Hedge Fund (HF) industry. Interest in these products comes at a time when the growth of assets in the HF industry has slowed, leading some observers to conclude that the HF industry has become a mature, slow-growth industry.
This article analyzes UCITS hedge funds, the EU-regulated investment vehicles also called Newcits or alternative UCITS. Because this regulatory regime allows for a relatively large degree of latitude, the funds are potentially attractive to hedge-fund managers. In parallel, investors are pushing for more regulations in the alternative space. This helps to explain why more and more hedge-fund managers are now offering on-shore alternative products, or alternative UCITS.
Locking in the Profits or Putting It All on Black? An Empirical Investigation into the Risk-Taking Behavior of Hedge Fund Managers.
The ideal fee structure aligns the incentives of the investor with those of the fund manager. Mutual funds typically only charge a management fee that is a proportion of the funds under management. Hedge funds, on the other hand, generally change an incentive fee that is a fraction of the fund’s return each year in excess of the high-water mark. The justification generally given for these incentive fees is that they provide the manager with the incentive to target absolute returns.