Ask around for a legal beagle with experience in structured notes, hedge fund of funds or variable annuities.
Hedge fund of funds custody arrangements agreed entered into by pensions clearly do not enhance safety and reduce the administrative burden.
If this were the case then the purpose of the investment restrictions would be effectively undermined with respect to the hedge fund of funds hired.
"Every Tom, Dick and Harry is putting out a shingle, " laments Elizabeth Hilpman, a partner in Barlow Partners, a seven-year-old New York hedge fund of funds.
Does the pension invest in any hedge fund of funds?
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Last week I was preparing to testify as an expert on behalf of an investor who had lost millions in a hedge fund of funds recommended to him by a private bank.
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Looking past the current public cynicism about the hedge fund of funds industry, it is incumbent on financial advisors and their clients to bear in mind that the need for non-correlating asset classes will never change, and hedge funds of funds still provide this effective source of diversification.
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My example also assumes an annual expense ratio of 0.65% for both the individual hedge funds and fund of funds.
Their competence and duty to advise seemingly encompasses anything a fund may encounter- asset allocation, manager and fund performance, personnel turnover at managers, real estate, private equity, international and emerging markets, hedge funds, fund of funds, brokerage-everything but consultant-related issues.
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Hedge funds, including fund of funds, are generally unregistered private investment partnerships, funds or pools that may invest and trade in many different markets, strategies and instruments (including securities, non-securities and derivatives).
To be conservative, I assumed that the individual hedge funds that comprise the fund of funds charge fees of 1.5% of assets and 20% of profits.
Now throw in something for the 2-and-20 crowd, namely private equity managers, venture capitalists, hedge fund operators and funds-of-hedge-funds operators.
Each hedge fund within a fund of funds custodies the assets it manages, including pension assets, wherever it chooses.
The SEC enforcement action vindicates the efforts of Jason Papastavrou, who runs Aris Capital Management and a fund of hedge funds that invested in Quantek.
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The average fund of hedge funds investor pays a 2% management fee and an 11% performance fee, in addition to the fees paid to each of the underlying funds.
If not, why is the pension comparing performance of its hedge funds against a hedge fund-of-fund benchmark which involves additional layers of fees and is easier to beat?
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But rating agencies should surely not be involved as supervisors of fund managers, especially of unregulated hedge funds: they ought to be backstops, not gamblers' stooges.
But what the data do not do is compare hedge fund performance with that of mutual funds--those comparatively boring investment pools for ordinary mortals.
Morgan Stanley, for instance, sponsors a fund of funds, Liquid Markets Fund I, that puts investors' money into an assortment of hedge funds that each impose one-way incentive fees (plus annual management fees).
When big institutional investors were recently polled at a recent Goldman Sachs hedge fund conference about their return outlook for hedge funds, the overwhelming majority of them said they expected single digit returns in 2013.
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According to Hedge Fund Research, a research company, the value of assets in funds of hedge funds doubled last year.
On the other hand, it is certain that pension consultant funds of funds of funds and funds of funds and hedge funds will all derive significantly greater compensation from pensions as a result of elaborate hedge fund schemes.
Owen, a money manager, hedge fund investor and the author of The Prudent Investor's Guide to Hedge Funds (Wiley, 2000), attributes a large part of the problem to the cult of relative performance.
In a new paper, Jingzhi Huang of Penn State University and Ying Wang of SUNY-Albany examined the performance of 73 hedge fund-like mutual funds during the 2007 financial crisis.
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First, new 13F filings filed with the SEC reveal a number of mutual funds and hedge fund managers trimmed back their AAPL holdings and short interest that jumped considerably during the last two weeks of April per data from NASDAQ.
The SEC should also push harder to lower fund fees, improve disclosure and insist on overseeing hedge funds, the customers at the root of the mutual fund trading scandal, Bogle said.
Last year was the only one of the past ten in which funds of funds did not trail the company's hedge-fund index.
The billionaire founder of hedge fund Galleon Group then ordered his funds to trade on the inside information.
Historically a lot of hedge funds did their own fund administration, said Cherecwich.
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