Because fund of fund investors are people and they are swayed by reputation, association etc....
The Daily Alpha: Alternative Thinking on Strong Hedge Fund Names,
Apr 3 2017 | 1:49pm ET
Real talk on alternative investments, business, finance & politics
April 3, 2017
Quotes of the Day
"Hedge fund investors chase hedge fund names containing a special combination of words related to economics and geopolitics, or that convey power."
Don’t underestimate the power of marketing… no matter how bad the product is.
According to
researchers at the University of Buffalo, investors are smitten by hedge funds that have strong, powerful names.
And that’s even with these funds underperforming the ones with weaker names.
Add the word “Alpha,” “Prodigy” or some other strong moniker to upsell a fund, and the inflows increase by an average of more than $227,000 per year.
Names with gravitas and power include:
- Marathon Macro Strategic Allocation
- Manchester Alpha Fund
- Lionhart Aurora Venture Segregated Class A
Now to the performance. Despite the powerful names, the researchers said they were surprised that “funds with gravitas were not that hot in terms of performance.”
As CNBC explains, “hedge funds with positively associated name gravitas have annualized alphas up to 0.97 percent lower.”
