By Clayton Browne on November 14, 2015 11:44 am in Business
According to Elizabeth Parisian and Saqib Bhatti of the Roosevelt Institute, the decision by pension funds to invest in hedge funds some years ago has had disastrous consequences, ultimately resulting in subpar returns for the pension funds and paying billions in undeserved fees to hedge fund managers.
The new report from the Roosevelt Institute is titled “All That Glitters Is Not Gold”, and takes a closer look at whether hedge funds have provided U.S. pension funds better and less correlated returns as promised, and also tackling the question are hedge fund fees adequately disclosed and as high as many critics suggest.
Methodology of the study
Parisian and Bhatti analyzed 11 U.S. public pension funds investments in hedge funds. With publicly available data and data given by the pension funds, the authors undertook a year-by-year comparison of hedge fund net returns and total fund net returns for each pension fund. The study also compared the hedge fund rates of return to fixed income net returns for each pension fund to figure out whether hedge funds actually came through on their promise of uncorrelated returns and if less expensive fixed income strategies actually offer better net returns.
Hedge fund fees are not completely reported or fully accounted for, so Parisian and Bhatti used industry standard fee structures such as management and incentive fees then projected actual fees charged by hedge fund managers based on earlier statements of net return to investors. These figures are not exact because of lack of transparency with hedge fund fees, but are certainly close enough to come to a conclusion regarding the hedge fund investments by pension funds.
http://www.valuewalk.com/2015/11/pe...m_campaign=EMAIL_DAILY&utm_content=quick_link
According to Elizabeth Parisian and Saqib Bhatti of the Roosevelt Institute, the decision by pension funds to invest in hedge funds some years ago has had disastrous consequences, ultimately resulting in subpar returns for the pension funds and paying billions in undeserved fees to hedge fund managers.
The new report from the Roosevelt Institute is titled “All That Glitters Is Not Gold”, and takes a closer look at whether hedge funds have provided U.S. pension funds better and less correlated returns as promised, and also tackling the question are hedge fund fees adequately disclosed and as high as many critics suggest.
Methodology of the study
Parisian and Bhatti analyzed 11 U.S. public pension funds investments in hedge funds. With publicly available data and data given by the pension funds, the authors undertook a year-by-year comparison of hedge fund net returns and total fund net returns for each pension fund. The study also compared the hedge fund rates of return to fixed income net returns for each pension fund to figure out whether hedge funds actually came through on their promise of uncorrelated returns and if less expensive fixed income strategies actually offer better net returns.
Hedge fund fees are not completely reported or fully accounted for, so Parisian and Bhatti used industry standard fee structures such as management and incentive fees then projected actual fees charged by hedge fund managers based on earlier statements of net return to investors. These figures are not exact because of lack of transparency with hedge fund fees, but are certainly close enough to come to a conclusion regarding the hedge fund investments by pension funds.
http://www.valuewalk.com/2015/11/pe...m_campaign=EMAIL_DAILY&utm_content=quick_link
