FYI: For a decade or so before joining Vanguard, I managed a hedge fund. Over the years, I’ve had a multitude of conversations about how to properly benchmark hedge funds and other alternatives. Many investors have a well-thought-out rationale for how they do this, but others do not. So today I’m going to share with you the secret to improving the relative performance of hedge funds—or any investment for that matter—through proper benchmarking.
The fund I managed used an event-driven strategy, with a primary focus on merger arbitrage. Specifically, merger arbitrage is designed to capture the risk premium associated with potential deal failure in corporate mergers and acquisitions. Take a look at how merger arbitrage, and a few other popular categories of equity hedge fund strategies, have performed relative to the Russell 3000® Index over the last ten years.
Regards,
Ted
https://vanguardinstitutionalblog.com/2018/10/15/what-i-learned-as-a-hedge-fund-manager/
