{"type":"rich","version":"1.0","provider_name":"Transistor","provider_url":"https://transistor.fm","author_name":"In Conversation with Julie Segal","title":"Are Hedge Funds Worth It?","html":"","width":"100%","height":180,"duration":2049,"description":"Hedge funds charge too much and deliver too little. That’s a familiar — and admittedly changing — verdict from investors. But here’s a not-so-well-known fact: many of the largest and elite hedge funds have been missing from the numbers many institutions use to reach their conclusions.\nThat’s because hedge funds voluntarily report their metrics to commercial databases — and many funds are reluctant to share information that may be sold to competitors.\nIn a live podcast recording of In Conversation with Julie Segal at the Allocators’ Choice Awards Roundtable in late September, I interviewed Paul Zummo, CIO of J.P. Morgan Alternative Asset Management, and Jon Caplis, CEO of hedge fund research firm PivotalPath, about the hole in the data investors use to determine whether hedge funds are worth it and other practices that can distort how much money they put into everything from relative value funds and credit to multi-strats.\nThe good news, Zummo says, is that investors that are less bound by rigid investment policies, such as family offices and sovereign funds, have been increasingly allocating to hedge funds over the past few years.\nThese bullish-on-hedge-fund investors have been upending their asset allocation assumptions: plugging in higher expected returns and alpha and lower volatility and correlation with markets into their models. “If returns go up by a percent and a half and beta actually is zero… and vol comes down a bit, that’s going to look a lot better in an optimizer,” says Zummo.\nBut pension funds and other more traditional institutions have been lagging. These investors have far less flexibility in how they divvy up their portfolios (and there are plenty of good governance reasons to do that) and end up baking “flawed” hedge fund data into these influential capital market assumptions that determine their asset allocation.\nAnother problem Zummo points out is the widespread and wrongheaded assumption that hedge funds are somehow one asset class....","thumbnail_url":"https://img.transistorcdn.com/sGbiGXnQa59mCHdT4R21dhwLURlGMJ1i42suZKEbNto/rs:fill:0:0:1/w:400/h:400/q:60/mb:500000/aHR0cHM6Ly9pbWct/dXBsb2FkLXByb2R1/Y3Rpb24udHJhbnNp/c3Rvci5mbS9iNjhk/OWFjYzE0YTljOGYz/ZGMyMDdmNzI5YmNk/MmI3Zi5qcGc.webp","thumbnail_width":300,"thumbnail_height":300}