The Financial Standard – Hedge funds and their returns should not be a mystery, according to fund of hedge funds (FOHF) specialist Permal Group, even if the hedge fund moniker is now so widely bandied around it is next to useless.<\/p>\n
\u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cSaying something is a \u00c3\u00a2\u00e2\u201a\u00ac\u00cb\u0153hedge fund\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2 without an adjective before it is meaningless,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d said Isaac Souede, director of Permal Group and chairman and chief executive officer of New York based Permal Asset Management. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cIt\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s now a catch-all that means nothing. You\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2d be foolish to think you get [a hedge fund] unless you dig down.\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d<\/p>\n
It was also pointless, Souede said, to consider hedge funds as a group. The dispersion between the top and bottom end of hedge fund performance was huge, he said, much more so than is the case for conventional equities managers.<\/p>\n
\u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cAbout 5\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u20ac\u015310 per cent of long-only managers create value beyond index returns. The same is true for hedge fund managers, [however] dispersion between good and bad hedge funds is massive,\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d Souede explained. \u00c3\u00a2\u00e2\u201a\u00ac\u00c5\u201cYou can\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2t really use indexes, even hedge fund indexes \u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u00a6 you have to work on expected returns.\u00c3\u00a2\u00e2\u201a\u00ac\u00c2\u009d<\/p>\n
For this reason a FOHF could not rely on simply taking a broad sweep of managers \u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u20ac\u0153 it needed to drill down into their risk and return structures to see whether they really were offering value, and how. And it is quantifiable, with the right tools, Souede said.<\/p>\n