How to choose a hedge fund manager

If you want to select a hedge fund manager, don’t just consider their positions as an indication of future performance, argues Alain Ruttiens in response to a piece by Risk columnist Emanuel Derman. It’s important to ask the right questions and look for the appropriate information sources, such as due diligence papers from third parties

For researchers, articles such as that by Emanuel Derman (Risk March 2004, page 66) are always a blessing: freely, and sometimes subjectively, expressing the personal opinions of an expert, what is called in French a billet d’humeur, they are more pleasant to read than a strict research paper.

But, as in investment strategy, the corollary of such pleasure is an associated risk: namely the risk of yielding to a polemic viewpoint, more or less distorting some realities.

As a first example, Derman

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