The much-maligned fund of hedge funds (FOHF) business model got a boost from an academic study. Academics at Purdue University and Loyola Marymount University found that active FOHF management “out perform their style indices” and that the diversified investment methodology “adds significant value.” The report, however, found “mixed evidence” of FOHF to allocate based on “style allocation abilities,” while pointing to the added layer of Fund Of Fund fees, not lack of hedge fund selection skill, as causation lower performance. Fund Of Fund fees – Onerous “double” fee structure is the problem with the model, not skill in selecting managers…
New Study Lauds Fund of Hedge Funds Selection Capabilities, But Questions Fees
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.