Institutional support bolsters hedge fund returns

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Hedge funds that receive both seeding and operational support from a larger investment organization or service provider tend to outperform the broader hedge fund universe on a risk-adjusted basis, according to a new white paper co-written by Jefferies Asset Management LLC, and The Center for International Securities and Derivatives Markets.

The research specifically identified three types of relationships: seeding and operational support, seeding only and operational support only. The results generally indicate that funds affiliated with larger institutions outperform hedge fund benchmarks, “particularly on risk and factor-exposure adjusted bases,” the report concludes.

CISDM is based at the University of Massachusetts