Day one from the un-named event in London
Jun 2nd, 2008 | Filed under: Hedge Fund Industry Trends, Performance, Analytics & Metrics, Portable Alpha & Alpha/Beta SeparationWe report today from a three-day London gathering of some of the world’s largest institutional investors and the hedge funds that serve them (see postings from sister event in Boston last fall). The event focuses not on hedge funds per se, but on how institutional investors use them (portable alpha, fees, alpha/beta separation, 130/30, alternative beta, analytics etc…all the good stuff). In order to create an open atmosphere for candid discussion, organizers have us on a tight leash (there are otherwise no media present here and we can’t even tell you the name of the event). And while we can’t really tell you who said what today, we can pass along some of the major themes from the conference floor. Here’s some of what we heard…
Hedge Funds: Innovation from the garage?
After years of steady growth, it’s no surprise that traditional long-only money managers have been licking their chops over the potential to offer hedge funds. Meanwhile, hedge funds have been strangely attracted to the gazillions of dollars under management by the long-only managers. Today in London, managers and investors debated the relative merits, not of hedge funds and long-only funds, but of hedge fund management companies and long-only management companies. While many people can tell you the difference between a hedge fund and a traditional long-only fund, few seem to agree on the unique characteristics of each type of company.
Most here held the opinion that hedge funds was no longer a useful definition of an asset class. One panellist put it in terms of innovation. He described hedge fund companies as a platform for innovation. In an allusion to innovation in the technology sector, he said that innovation usually happens in garages, not in large corporations (a clear reference to the oft-cited garage where tech behemoth Hewlett Packard was born - pictured above). In other words, it may be difficult for a large traditional manager to deliver on the major promise of the hedge fund sector - innovation. Issues such as profit- (and risk-) sharing, for example, can often confound the efforts of long-only managers (e.g. banks – see related WSJ piece from last week) to maintain hedge fund programs over the long term.
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