Many hedge funds managers are really quasi-beta managers and investors should be wary according to head of investment consulting at S&P, Simon Ibbetson.
Speaking at the Australian Hedge Fund Forum Ibbetson said many hedge funds were really simply delivering beta from well established strategies. While he said alpha did exist, not many managers actually captured it. Speaking as part of a panel called “;Is alpha more than an expensive con trick?”;, he said investors needed to ask a manager how it was original and different from the pack. “;If all we are getting is diversified beta then why are we paying performance fees,”; he said. “;I see a lot of diversified beta coming through… when you look at a severe market periods a lot of these sophistictaed techniques have failed us.”; In August a lot of hedge funds notched negative performances and Ibbetson asked if those managers were pursuing genuine alpha generatingg opportunities why did so many underperforn in sync with the market? “;That hedge funds are meant to preserve capital has been lost in the tide,”; he said. Also speaking on the panel Ian Morley, director Olympia Capital Management, said what differentiated managers was this concept of alpha but no one was quite sure what it was. “;Alpha can’t be diluted, it doesn’t stand still, and there must be a limit to the size of alpha,”; he said. According to the panel which also included AIMA chair, Kim Ivey, investors needed to differentiate between alpha generators and beta managers by doing thorough due diligence. Investors needed to be sure they were not being bluffed.
Since taking over the top job at the $44 billion Funds SA more than a year ago, chief executive John Piteo has ushered in an investment function overhaul and wrapped up an important stage of the fund’s five-year data transformation program. It pledges to recentre around investment performance and more efficient processes, as the “missing piece” has been found in incoming CIO Con Michalakis.
Darcy SongJanuary 10, 2025
