Up-capture: A different way of defining value-added in fund management
Jan 21st, 2010 | Filed under: Performance, Analytics & Metrics, Today's Post
We are accustomed to judging the value-added of investment funds in somewhat of a vacuum. That is to say, we do so without regard to our own judgments about where markets will go in the future. All that seems to really matter is the risk adjusted performance of a fund vs. its benchmark. If that benchmark goes up by, say, 10%, we hope our managers beat it by, say, 3%. If it goes down by 10%, we still hope to beat it by 3%. Despite the “absolute return” moniker conferred upon hedge funds, they too aim to simply beat their appropriate index, whether it be the HFRI convert arb index in the short term or the S&P 500 over the long run. More…
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