Determinants of Funds of Hedge Funds' Performance

Despite institutional investors' growing interest in funds of hedge funds, little attention has been paid so far to their added value and/or the sources of their added value.


Noel Amenc

Director of Research at EDHEC Business SchoolDirector of the EDHEC Risk and Asset Management Research Centre

Mathieu Vaissie

Senior Research Engineer at the EDHEC Risk and Asset Management Research Centre

This is all the more striking in that funds of funds are far from transparent and, with their double-fee structure, are relatively costly investment vehicles. Our objective in this paper is to fill the gap and find out whether funds of funds add value through strategic allocation and active management. To this end, we ran a RBSA on a sample of 97 funds of funds over 1997/2004.  89% of the funds of funds turned out to add value at the strategic allocation level but only 31% at the active management level. Finally, only 20% of funds of funds created value through both strategic allocation and active management. In other words, if picking the best performing funds is a challenging task, picking the best performing funds of funds appears to be equally difficult.
Determinants of Funds of Hedge Funds' Performance...
(-1.00 B)
Type: Working paper
Date: le 06/02/2006
Extra information : Pour plus d'informations, nous vous prions de vous adresser à Joanne Finlay, Direction de la recherche de l'EDHEC [] Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC.
Research Cluster : Finance

See Also

EDHEC - Risk’s annual European ETF and Smart Beta Survey results show growing demand for new developments in existing Smart Beta offerings
- 20-09-2018
EDHEC-Risk Institute has announced the results of the 11th EDHEC European ETF and Smart...
5 tips to kick-off your MBA successfully as an international student
- 18-09-2018
Whether your ambition is to boost your career, learn the latest in leadership, expand...
Asset Pricing Conference: Major Advances, Nobel Prize and Eminent experts
- 12-09-2018
EDHEC Business School, the Fama-Miller Center at Chicago Booth, and the Review of...
Riccardo Rebonato speaking on smart beta fixed income at 14th Quantitative Finance Conference
- 10-09-2018
Riccardo Rebonato, Professor of Finance, EDHEC Business School and Member, EDHEC-Risk...