New Study Lauds Fund of Hedge Funds Selection Capabilities, But Questions Fees

The much-maligned fund of hedge funds (FOHF) business model got a boost from an academic study. Academics at Purdue University and Loyola Marymount University found that active FOHF management “out perform their style indices” and that the diversified investment methodology “adds significant value.” The report, however, found “mixed evidence” of FOHF to allocate based on “style allocation abilities,” while pointing to the added layer of Fund Of Fund fees, not lack of hedge fund selection skill, as causation lower performance.

Fund Of Fund fees - Onerous "double" fee structure is the problem with the model, not skill in selecting managers

The FOHF business model has been much derided due...