2008 was a traumatic year for investors in pretty much any asset class or strategy. In 2009, I’ve been reading a number of investor surveys seeking to discover what investors want. I am as usual focusing in particular on the hedge fund industry.
 
Key findings:
 

Investors continue to favour larger hedge funds in the 1 [...]

 
For those of us who have lived through major bear markets there is significant skepticism about the current equity market rally.
 
Reasons to be optimistic:
 
·          Economic data is improving. The extreme inventory destocking in late 2008 is being reversed. Housing prices are stabilizing. Housing transactions are rising.
·          China as an engine of growth. For [...]

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We begin in the past:
 
In the financial market collapse of 2008, one area of particular decline has been the fund of funds industry. Many fund of funds run to a greater or lesser degree, an asset liability mismatch. That is, [...]

 
I have argued before that hedge fund fees were poorly designed, and in that article had suggested a possible design for performance fees. Here I provide more detail into what I think is a practical solution which addresses some but not all of the problems with current fee structures.
 
Management fees:
 
This is the simpler issue to [...]

Leverage. It always gets blamed whenever bad things happen to investments and markets. But leverage in itself is neither good nor bad. Leverage is a magnifier of returns, both positive returns and negative returns. The idea behind leverage is that it can be used to make a small return into a big return. Here is [...]

Dear China,
 
Thank you for being a good partner over the last decade. You have been a great help in helping to keep inflation low by being a low cost producer. We have been happy to export our productive capacity to you. We have been happy to buy your exports. While this has created a large [...]

With the meltdown in financial markets and the near collapse of the banking system last year, hedge funds have come under increasing regulatory scrutiny. Whether or not this is justified is another matter. There is certainly justification for more scrutiny and more useful regulation with the emphasis on the useful. Unfortunately the trend has been [...]

Equity and credit markets continue to fall.

Investors have shifted their allocation into cash and government bonds.

Correlations between assets is not 1. In fact, correlations between hedge funds and other asset classes such as equity have fallen from 95% in 2006 / mid 2008 to 70% currently.

Moving allocations into a risk free asset does not monotonically [...]

The hedge fund industry has come under a lot of fire in the last 12 months. They have been blamed for falling markets, failing banks, rising costs of credit, bad weather, you name it. But while it is easy to target an industry where a hedge fund manager can earn millions in a year, what [...]

February was another difficult month for hedge funds. If anyone thought 2009 would be an easier year for hedge funds, think again. Hedge funds lost 0.51% in February, compounding January’s 0.09% loss for a year to date loss of 0.60%, according to the HFRI Index. Fund of funds managed a smaller loss of 0.31% which [...]