LiveMint (WSJ) – After the global financial meltdown of the last year, hedge funds have been under considerable stress globally. The operations of all such funds have been viewed as being non-transparent, not subject to regulatory oversight, and high-risk, high-return operations that are run away from the limelight of financial markets.

The very nature of their operations has made them costly, in the sense that payments of upfront 2% fees and 20% of profits are the norm rather than exception. There have also been several scandals connected with hedge funds in the last year, most notably the Bernie Madoff one, which has reduced investor confidence in these funds and their operations.

Read Complete Article

Tags: bernie madoff, clones, financial-markets, hedge funds, regulatory oversight

Seeking Alpha - “You don’t want to be average; it’s not worth it, does nothing. In fact, it’s less that the market. The question is, ‘How do you get to be first quartile?’ If you can’t, it doesn’t matter what the optimizer says about asset allocation.” – Dr. Allan Bufferd, CIO of the MIT endowment in Foundation and Endowment Investing.

While Dr. Bufferd was talking about investing in private equity, the same applies to hedge funds as well. (We have two extensive chapters on the topic in my book.) I wanted to chat a bit about hedge funds, and then more specifically hedge fund clones. I have written a bunch of articles on hedge fund indexing and replication in the past, and there has been a lot of chatter recently about hedge fund clones.

Read Complete Article

Tags: asset-allocation, clones, endowment, Private Equity, replication