16Rock Asset Management’s Post

Hedge funds are poised for a major comeback! With today's higher rates and volatility, Mercer’s John Jackson shares why now is the time for active management. Read his insights in the following blog post! https://bit.ly/3XoWX7r

Hedge funds are poised for a major comeback! With today's higher rates and volatility, Mercer’s John Jackson shares why now is the time for active management. Read his insights in the following blog post! https://bit.ly/3XoWX7r

A juicy investment management fee focused paper to get the debate going on a lovely Spring Wednesday morning! Investors are honing in on the hurdle rate debate. We’ve seen cases where hedge fund managers have lost out on mandates specifically because of unwillingness to introduce hurdle rates. This, in our view, is likely to become an increasingly common stance among investors as the months pass. Yet, according to bfinance manager search data, only 27% of hedge funds currently use a hurdle rate and this figure does not appear to have increased by any statistically significant margin. Read more in our latest article here: https://okt.to/AMBFvd

https://lnkd.in/gt4gJDiy "Hedge fund managers want you to believe they're rich because they're producers and innovators. The reality is they simply play by different rules. In this case, they are making billions front running the stock indices that financial advisers told their mom-and-pop investors were Wall Street's safest investments. ....... Another goal of index investing is transparency, which is an admirable ideal but is terribly misguided in this situation. Indices have transformed from mere guidelines to precise benchmarks. Rather than looking to the index for guidance, many index fund managers are copying it mechanically and still getting paid despite doing no thinking at all. The assets benchmarked to the S&P; 500 exceeded $2 trillion last year. That's $2 trillion of dumb money just waiting to be front run by Wall Street. Front running is one of the easiest ways to make money. It's essentially insider trading, except the inside information isn't about corporate activity; the information is about client order flow. In this case, since the index investors are not their clients, it is legal for hedge funds and any independent traders to front run them. One could argue that the hedge fund managers are doing nothing wrong; it's the investors' fault for acting irresponsibly. The problem with that argument is that many of these investors don't have a clue about what is happening to them. They are trusting their financial advisers and investment managers to act in their best interests, but as.... One of my favorite parts of the investment industry is how fees aren't your only expenses. Typically, a fee is a payment you make to a third party for services rendered. On Wall Street, you may never have to actually write a check to anyone. All the expenses are merely deducted from your account and are usually documented in some obscure footnote in small writing. If you actually read that document, you would encounter words like expense ratio. Doesn't sound as bad as a fee. It's just a harmless ratio. By turning dollars into ratios, the investment industry shifts the focus from concrete fees to abstract math. Other words may never be mentioned - words like "market impact," which is the price slippage that affects a portfolio as more trading takes place. Index funds have taken market impact to a whole new level. By mechanically following their benchmark index and not using any discretion, index fund managers are giving the green light to hedge funds to front run them. They don't care about this because they get paid even if their clients get front run. While you will never see a "Front Running Expense Ratio" in your fund prospectus, one researcher decided to analyze what that ratio would be. Christophe Bernard, PhD Senior Scientist at Winton Capital Management, estimates that front running costs index investors 0.20% per year. That's 4 times the official expense ratio of Vanguard's S&P; 500 ETF."

An interesting Bloomberg article on asset owners shifting to portfolios of SMAs. Many of them are working with intermediaries such as New Holland Capital, LLC and Walleye Capital: "Firms like Waleye's Dockside and Innocap help allocators invest in hedge funds through managed accounts and negotiate terms. The allocator picks the funds they want as their so-called pods and can compare trades made by the various vehicles." "the Wisconsin pension typically borrows capital to make hedge fund investments, but that became too expensive. Using Dockside’s prime brokerage relationships means it can turn a smaller stake into more exposure. Plus, efficiencies such as offsetting buy and sell orders of the same asset across various funds could also trim the expense of executing trades." All very sensible, and customizeable - another evolution of the old FoF model. I wonder what these third parties charge. https://lnkd.in/gkg7aMqQ

Exploring the strategic shifts in the U.S. real estate landscape, hedge funds are now betting on a robust rebound, forecasting a potentially lucrative turn for CRE investments. https://lnkd.in/gmzub4Tn

Read the Mail & Guardian article, in which our Head of Distribution, Alan Yates, along with other industry heads, explores the increasing popularity of hedge funds in South Africa among a broader range of consumers due to enhanced regulatory oversight. The article highlights how hedge funds can offer risk-adjusted returns with downside protection. Learn more about our hedge funds: https://lnkd.in/e_STrJHR   #HedgeFunds #WealthManagement

Investors are honing in on the hurdle rate debate. We’ve even seen cases where hedge fund managers have lost out on mandates specifically because of unwillingness to introduce hurdle rates. This, in our view, is likely to become an increasingly common stance among investors as the months pass. Yet, according to bfinance manager search data, only 27% of hedge funds currently use a hurdle rate and this figure does not appear to have increased by any statistically significant margin. Read more in our latest article here: https://okt.to/FQpciJ

Perhaps the greatest financial anomaly is the growth of hedge funds, as I discuss in my latest article for The Evidence Based Investor https://lnkd.in/g2_ByRDr #hedgefunds #investmentstrategies

Hedge Funds is a key part of the alternative landscape. It requires some specific knowledge and resources to capture the relevant opportunities. Thanks AlphaWeek for this short exchange with Johann Ropers on the way we approach it. #AXA IM Prime #HedgeFunds