Ineichen: “No Skill Involved” in Managing Most Mutual Funds
Jan 3rd, 2007 | Filed under: Investment Management FeesThose of you in the hedge fund industry will recognize the name Alexander Ineichen. Ineichen has written several of the studies that form the foundation of today’s alpha-centric investing paradigm. Last month his new book, Asymmetric Returns hit book stores. We mentioned it on this blog and promptly reserved the first available copy to be delivered across the world’s longest (formerly) undefended border to Canada.
The book contains several useful lessons couched in an easy-to-read narrative that makes liberal use of colourful language (more on that in a future post). Ineichen spends a chapter discussing management fees - a topic that looks a lot simpler on the surface than it actually is.
But first, a quick overview of Ineichen’s key message.
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[…] With their perfectly-timed trains and neatly-arranged homes, the Swiss are big fans of symmetry. This makes UBS’s resident hedge fund guru Alexander Ineichen all the more of an anomaly. His book Asymmetric Returns has been garnering a lot of attention not because it espouses order and regularity, but because it so vocally challenges the status quo, refutes conventional wisdom and, well, questions symmetry itself. […]
[…] As we’ve argued before, investors should essentially be paying for tracking error, not simply performance. Riding betas up and down does not take skill - as author Alexander Ineichen pointed out in his book Asymmetric Returns (see related posting). In other words, investors should pay active management fees for active management, not simply for a short-volatility strategy (in the case of hedge funds) or an index-hugging strategy (in the case of mutual funds). […]