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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. ■

Well, this way of looking for new growth is sure to land you in prison. A post on HedgeFundBlogger titled  Hedge Fund Marijuana sent me laughing out loud today. Some quotes: "Tara Bryson and her boyfriend recently received a grant from the state government to set up a goat farm. Instead, the two built a farm to grow marijuana." "Tara Bryson, 36, is the sister of David Bryson, co-founder of Ridgefield, CT-based ew Stream Capital. She heads investor relations for the $1 billion asset-backed lending fund that charges high rates to loan distressed companies money." "Bryson was arrested by the Connecticut State Police in Newtown on July 9th for three felonies: possession of marijuana, cultivation of marijuana, and conspiracy to cultivate marijuana. She plead not guilty, was released on $25,000 bail, and returned to work with investors at New Stream." And I thought this type of reckless hedge fund managers was an endangered species on the brink of ex...

I remember I scoffed about CAIA L1 exam. I found it all too easy, and started thinking CAIA should not really stand in one line with CFA. I am starting to change my mind. After some relatively easy sections on Real Estate and Private Equity, here come Hedge Funds and Structured Products, and all of a sudden the exam does not feel so easy any longer. François-Serge Lhabitant, whose book Hedge Funds: Quantitative Insights I had the pleasure (and the pain) reading in the past, really knows what he is writing about... His in-much-detail description of Hedge Fund investment strategies is extremely informative, but memorizing all the formulas involved is no bed of roses. Same goes to the Structured Products. With only a few weeks ahead before the exam, I feel I really need to step on the gas. RELATED POSTS: CAIA Level 2 Exam CAIA Level 1 Exam Comparison of financial certifications CFA and CAIA Designations ■

The article reference below highlights an interesting development. I happen to know that Morgan Stanley Private Equity Asian team is much more nervous about the Volcker rule and does not rule out the possibility of having to become independent. JPMorgan, on the other hand, seems to be on prowl to acquire HF/PE firms. I think there are two points that are worth mentioning in connection with these differences: 1. JPM is much more of a deposit holding bank than MS. As such, it is likely they will be less affected by any looming regulation. 2. Even more importantly IMHO, Brazil is increasingly catching the headlines and claiming the spotlight, in a sense becoming "the next China". And in many respects, for a good reason: it's much less reliant on exports (and when it comes to oil, on imports), the fundamentals look robust, the GDP growth is accelerating and the inflation has been within a reasonable range for years. I have never had the pleasure of talking to a Brazilia...

Uncertainty about regulation and unqualified politicians trying to rewrite it do nothing good neither for the hedge fund managers nor for the investors the politicians are allegedly trying to protect. New twist to this story in the article below: Geithner Again Pushes Against EU Hedge Fund Rules FINalternatives

Hedge Funds Nitty-Gritty Series Post 1 Beware of the Numbers From my personal experience, some people tend to believe (although the institutional investors community would generally disagree) that when it comes to hedge fund returns, the higher they are the better. In reality, however, the situation is much less clear-cut. Firsrtly, the risk tolerance and return expectations for every investor are different, and therefore her/his assessment of a high-performance hedge fund will also be different. For instance, there is a general preference for lower risk/lower return funds among Japanese institutional investors. But secondly, and even more importantly, the returns alone don't tell the whole story. In this post I'd like to describe some of the metrics and concepts that are used for hedge funds due diligence when assessing the risk/return profile (operational and investment strategy due diligence are broad subjects that deserve a separate in-depth review).

In late October I travelled to the US and Canada on a business trip that was exclusively dedicated to timberland investments. I had an opportunity to meet with a number of investment managers and some investors into the asset class, tour the timberland both in the South and in the Pacific Northwest, and collected a dearth of data, both from conversations and in print. It would take a multi page report to describe everything I learned, but I just wanted to outline some topics that I felt were of particular interest, and draw some parallels with other alternative asset classes.

Last Thursday (December 3rd) investment managers, prime borkers, compliance specialists and other professionals involved into hedge funds this way or another, gathered in Roppongi Hills overlooking the busy Tokyo city for a few drinks and a lot of networking. Organized by Mr. Stefan Nilsson, the founder and president of the Hedge Fund Club , the party was much more lively and cheerful than the same event a year ago. This time it was even filmed by a local TV station, and feeled much more crowded. I enjoyed meeting new people, among them a manager of an art fund, and a Europe-based manager planning to launch a "forestry fund", which apparently is what timerland funds are called in Europe. All in all, things seem to be picking up little by little, so let's hope for a truly happy New Year.

Some of the readers may remember my post People Needed to Manage the Fun , that I posted this summer. Apparently, whoever posted that job description may have been less mistaken than I thought. I am reading the AIMA's Roadmap to Hedge Funds , and one line there drew my attention: Some [absolute return managers] go even so far as to referring to the traditional asset management as "fun management" rather than "fund management"... Although I doubt that the pun was intended on the part of the job-poster, it is still quite amusing. On a more serious note, the attitude towards the traditional long-only managers described above is based on the fact that they are not held accountable for any losses, whereas the HF managers are, both by means of watermarks, hurdle rates and more often than not, co-investment of their own capital.