Calpers, Citi, Merrill Lynch, Morgan Stanley: Most hedge funds not worth the fees

By Lawrence Delevingne

Wed May 2, 2012

Professional portfolio consultants dish on alternatives at the Milken Institute Global Conference.


 Lisa Shalett

LOS ANGELES -- Top portfolio consultants questioned the need for large allocations to hedge funds at Milken Institute Global Conference, saying only a fraction of the industry deserved the high fees they charge.

Lisa Shalett, chief investment officer of Merrill Lynch Global Wealth Management, pointed out an inherent problem: hedge funds may pitch themselves as low-correlation investments, but they are paid on performance even if they simply mimic the markets. In other words, investors often pay dearly for beta.

"It's a massive misalignment of incentives," said Shalett, speaking on the "Diversifying Portfolio Risk Through Asset Allocation" panel Tuesday. "For...


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