Are Hedge Fund Fees a Bargain? And Other Conundrums of Balancing Active & Passive Management
Nov 8th, 2006 | Filed under: Investment Management FeesBy: Randy Cohen, Harvard Business School & Kerry Stirton, Stellation Asset Management
Published: August 2006, The NMS Exchange
Alpha Male spent this morning speaking about our favorite topics at the “World Hedge Fund Summit” in Toronto. Other session topics were consistent with similar hedge fund events around the world. But one of my favorite speakers at this particular meeting every year is Randy Cohen of Harvard Business School.
Along with Kerry Stirton of Stellation Asset Management, Randy penned a great piece called “Are Hedge Fund Fees a Bargain? And Other Conundrums of Balancing Active and Passive Management” in the August 2006 edition of The NMS Exchange, an investment management newsletter serving the endowment & foundation community. Their thesis:
“(Pensions) should eliminate commitments to structurally underperforming long-only active managers…Active hedge fund managers who aim their sights directly at alpha generation are a much better deal, as are passive index funds that secure market exposure or beta at a cheap cost.”
Like Ross Miller, Cohen & Stirton argue that the effective fee for active management embedded within an index-hugging long-only mandate is much higher than commonly realized:
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[…] Some of our favorites will be there: Harvard’s Randy Cohen (related posting), Prudential’s Michael Lillard (related posting), Man Investment’s Angelo Calvello (related posting), Casey Quirk’s Jeb Dogget (related posting) and Wilshire’s Jim Dunn (related posting). […]