Hedge Funds Perform When Managers are Vested and Inflows are Limited

Research from NYU and Columbia University shows that hedge fund managers that invest in their own funds deliver the best results, according to a recent article in Institutional Investor. In a paper distributed this month, the researchers report that “insider investment aligns incentives between managers and investors and induces managers to limit the size of their fund, resulting in higher alphas.” The study also shows that when funds raise outside capital, managers are “compensated primarily… Read More

Hedge Fund Coatue Invests in Data Science

Hedge funds continue their push into “big data” analysis to land trading opportunities, and Coatue Management LLC is no exception, according to a recent article in The Wall Street Journal. The fund recently announced a $27 million funding round for a company called Domino Data Lab Inc., a San Francisco startup founded by Bridgewater Associates LP alumni. Coatue joins other investors including Bloomberg Beta, Zetta Venture Partners and Sequoia Capital. “Domino’s software allows data scientists… Read More

Yale’s Actively Managed Fund Performance Waning

The majority of the Yale University endowment fund is invested with active managers but, if you compare its returns to low-cost active strategies rather than to passive indices, “Yale’s active managers don’t look so special,” writes Bloomberg’s Nir Kaissar. In its recently released 2016 annual report, the article says the esteemed university’s endowment rebutted “fee bashers” by arguing, “The important metric is net returns, not gross fees.” Kaissar points out, however, that Yale’s attempt to… Read More

Tiger Cubs are Licking Their Wounds

A generation of hedge-fund firms started by protégés Tiger Global Management’s Julian Robertson, known as “Tiger Cubs”, are “among of wave of stock hedge funds that fared poorly in 2016,” says a Wall Street Journal article from earlier this month. Last year, the article states, Tiger suffered losses of about $900 million (a 15.3% loss) and, according to Morgan Stanley data, only one-fifth of the 8.5% gained by the MSCI AC World index last year… Read More

Bridgewater Has Strong Showing in 2016

Ray Dalio’s Bridgewater Associates earned almost  $5 billion for its clients last year according to a report by hedge-fund investor LCH Investments NV, versus losses suffered by rivals George Soros and John Paulson. This according to a recent Bloomberg article. In fact, the article points out, Bridgewater was the “most lucrative, in absolute terms, of the top-20 hedge funds ranked, and bucked the trend of a generally disappointing year for the industry.” In the report,… Read More

Pushing the Envelope Has Paid Off for Select Hedge Funds

On the whole, the past year hasn’t been great for hedge funds, but those who “ventured far afield” seemed to do better, according to a recent article in The Wall Street Journal. Specifically, the article says that some of the biggest profits materialized in “areas less frequently traded” including: Russia and Central Asia: One of the world’s biggest Russia-focused hedge fund firms, Moscow-based Prosperity Capital Management (approximately $3.3 billion in assets), reported a 57% gain… Read More

Hedge Fund Managers Search for Alpha in Big Data

If the world’s annual data generation was loaded into iPad Air tablets, says a recent Financial Times article, “the pile would reach from the earth to the moon more than six times over.” Technology companies can harvest information from consumer emails and online receipts which can then be “scraped, aggregated and sold to investment firms looking for tradable signals, or to use the jargon—’market-beating alpha’.” However, the article explains, “The investment industry’s push into alternative… Read More

Big Data Doesn’t Automatically Mean Big Investment Returns

The quant craze in investing doesn’t come without its own set of challenges, says a recent Bloomberg article. As hedge funds delve headlong into the data world to hoist up returns and stay competitive, some may lack the prowess necessary to harvest relevant and accurate numbers, says Matei Zatreanu, who led the charge at $19 billion hedge fund King Street Capital Management. “There are those who realize their industry is changing and their fund isn’t… Read More

Hedge Funds Hungry for Quants

If you’re looking to land a job at a hedge fund, polish up your algorithm building and data mining skills to get to the front of the line. This according to a recent Bloomberg article that explains how hedge funds are hiring quants “like never before in search of an answer to lackluster returns.” King Street Capital Management and Tudor Investment Corp. are among the names anxious to beef up their data analysis and research… Read More

GMO: Don’t Bail on Hedge Funds

The fall in rates since the financial crisis has benefited stocks and other long-duration assets while hurting short-duration assets such as hedge funds, says GMO’s Ben Inker. “The characteristics that made hedge funds disappoint,” he says, “may well prove a blessing if discount rates start to rise.” Inker argues that today’s high returns and advanced U.S. equity valuations are not sustainable because they “represent an increase in the present value of an asset without any… Read More