The article in FT titled Few FoHFs yield value, report says claims fund of hedge funds are largely equivalent to a random selection of a basket of hedge funds, and fail to generate alpha on the fee-adjusted basis. Maybe. But they do all the dirty work on monitoring, re-balancing and (only the better ones) keeping investors money away from fraud. Whether this deserves 1% of management fees and 10% incentive fees, is indeed subject to debate, but I do believe Fund of Hedge Funds have their own merit. Plus, the paper (of which original could not be obtained) apparently uses hedge fund indices for the analysis. I am sure most people are aware of how flawed these metrics are. Borrowing some statisticians parlance, this "fails to reject the hypothesis" of FoHF value added "within the confidence interval", in my humble opinion. On the other hand, not every Fund of Hedge Funds deserves high praise, with that I wholeheartedly agree. ■
A collection of information and opinions on the economy, alernative investments and investment banking as seen by a long-time foreign resident in Tokyo