Are Hedge Funds Worth It?

A live recording of In Conversation with Julie Segal at the Allocators' Choice Awards Roundtable, featuring Paul Zummo of J.P. Morgan Alternative Asset Management and Jon Caplis of hedge fund research firm PivotalPath. The discussion centers on the gap in commercial hedge fund databases caused by voluntary reporting, and how that data feeds into the capital market assumptions institutions use to set asset allocation. It also covers which investor types have been increasing hedge fund allocations and the argument that hedge funds should not be treated as a single asset class.

1. Hedge funds report their metrics to commercial databases voluntarily, and many are reluctant to share information that may be sold to competitors, so some large and elite funds are missing from the numbers institutions use.
2. Zummo says investors 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, plugging higher expected returns and alpha and lower volatil
3. Pension funds and other traditional institutions have less flexibility in dividing their portfolios and end up baking what the podcast calls flawed hedge fund data into capital market assumptions.
4. Zummo argues it is wrongheaded to treat hedge funds as one asset class, since aggregated industry numbers mask what is happening with individual strategies or managers.