Put Into Perspective: Hedge Funds Are There For Diversification

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Put Into Perspective: Hedge Funds Are There For Diversification by Skenderbeg Alternative Investments

Female Hedge Fund Managers Have Outperformed Men Since 2007

Female hedge-fund managers have outperformed their male counterparts by a wide margin since 2007, according to research compiled by KPMG and published in the recent white paper Breaking Away: The path forward for women in alternatives. And yet, 79% of the more than 300 female alternative fund managers, investors, and other professionals said they believe it is more difficult for women to succeed in the industry. How can this be?

Held to the same standard

“This year’s report demonstrates that many industry professionals believe women-led funds lack investor access and visibility despite better performance than the industry,” said Kelly Easterling, KPMG Audit partner and co-author of this year’s report, in a recent announcement. “But women are not asking for special treatment, they want to be held to the same standards as their peers, whether male or female.”

Women aren’t asking for special treatment, and they’re not receiving much, either. Only 7% percent of investors surveyed have mandates to invest in women-owned or -managed funds, and they typically allocate less than 10% of assets to these managers. But such mandates shouldn’t even be necessary, considering how the HFRI Women Index of women-owned and/or –managed funds and firms have outper-formed the broader hedge fund universe almost every year since 2007.

HFRI Women Index performance

For the five years ending in June 2015, the HFRI Women Index has returned 6.25%, compared to 5.13% cumulative returns for the HFRI Fund Weighted Composite Index and 1.54% for the HRFX Global Hedge Fund Index. Since January 2007, women-led funds have generated total returns of 59.43%, trouncing HFRI’s 36.69%, and HFRX’s negative returns for the period.

“There are a lot of excellent women out there who warrant capital and already have proven performance,” said study participant Kate Mitch-ell, co-founder and partner with Scale Venture Partners “But there’s a dearth of women being developed through the talent pipeline. If firms proactively compiled diverse candidate slates to interview, we could really move the needle.”

One concern voiced by some survey participants is that mandates give the impression that women have earned their business on the basis of their gender, rather than because of their ability to generate strong returns. The performance of the HFRI Women Index however provides clear evidence that women-owned or -managed firms deserve to be included in the mix of managers considered by investors.

For more information, download a pdf copy of the white paper.


Hedge funds are there for diversification

Sir, There is a bubble in articles blaming hedge funds for the wrong reasons. Hedge funds never had the objective of beating stock or bond indices. For example, in “Asset prices march to one unnerving beat” (October 9), Gillian Tett laments that hedge funds have recorded “several years of below-par performance, in which many hedge funds have failed even to beat the US stock index”. Then, in “Pension schemes are ill-advised to seek hedge fund perfection” (Insight, October 16), Dan McCrum concludes his analysis saying that “the very best that might be hoped for from investing in smart, and expensive, hedge funds is simply to have kept pace with dumb old stocks”.

But hedge funds were not conceived to replace stocks or bonds in institutional investors’ portfolios. Rather, the role of hedge funds is to provide diversification (uncorrelated returns) when added to portfolios of stocks and bonds and other assets. And this they have done and continue to do, as a whole industry. Using the data Mr McCrum employs in his article, over the past 10 years an equally weighted portfolio of stocks, bonds and hedge funds (one-third in the US stock ETF SPY, one-third in the US government bond ETF TLT, and one-third in the HFRI composite index at the beginning of October 2005) had a lower volatility (6.8 per cent versus 8.8 per cent annualized volatility) than the 60-40 portfolio of stocks and bonds, providing valuable diversification.

The Financial Times

Neighbors be damned Falcone continues tradition of scaring the bejesus out of passersby on Halloween

As some of you may recall, around this time last year, hedge fund manager Philip Falcone and his wife Lisa Maria set the Upper East Side atwitter with what their neighbors felt was a Halloween scene so horrifying that it would leave small children and fully functioning adults scarred for life. So scandalized by the “black-clad grim reaper beheading a corpse popping out of the roof, the growling gargoyle, and the possessed little girl sitting on a swing” that the Falcone neighbors did what anyone living in America’s most expensive zip code would do if faced by a similar situation, and bitched about Phil and Lisa to Page Six.

…perhaps the most disturbing horror prop is a creepy, old, dwarfish crone with stringy gray hair and striped socks who’s holding a turgid, dead baby. Making the scene even more macabre are fake rats and dismembered baby limbs, skeletons and a sign that says, “Keep out.” One neighbor said, “Other mansions on the street are decorated, but the Falcones’ grasp of horror is at another level.” Another local cracked, “This dovetails with rumors they couldn’t even find a new hearse. That old thing looks like it’s from ‘Ghost-busters.’ ” A third joked, “Should Jonathan Tisch have to walk by the hearse every day?” Neighbors in the tony hood include Jeff Koons, who’s constructing a mega mansion across the street, and Jonathan and Lizzie Tisch.

And while another, lesser hedge fund manager might have bowed to the complaints, either by dialing back the gore or forgoing decorations entirely the following year, Phil Falcone said no. And maybe “How dare you?” and definitely “You bitch about my holiday cheer? I TURN IT UP 10-FOLD.”

See full PDF below.

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