WEST PALM BEACH, FL (www.hedgeco.net) – New research conducted by Roger Ibbotson, the Yale University finance professor, and hedge fund partner and chairman of the Chicago-based research firm, hasshown that hedge fund risks are actually lower than those of the S&P 500. According to the new research soon to be published, �the standard deviation, a common risk gauge, was 7.9 percent for thehedge funds studied from 1995 through March 2004. The risk associated with the S&P 500 was 18.2 percent during the same period.�

On hedge fund returns, the new research also shows that the excess returns are shared roughly equally between investors and managers. Ibbotson also said, �The alphas are approximately equal to fees.” Such study underscores the need of diversification as a way to shore up investment portfolios. According to the study, multi-manager hedge funds are best positioned to provide such portfolio diversification.

The study also showed that, �Multi-manager funds offered superior net returns, they would be a much easier pill to swallow for individual investors. Yet funds of funds are among the costliest vehicles to own, in addition to underlying fund expenses of 1.5 percent to 2 percent annually plus management performance fees of 20 percent, multi-manager funds overlay an additional layer of charges.�

The Ibbotson study shows that while money flowed into hedge funds last year, hedge funds averaged an 8.27 percent return, according to the Hennessee Hedge Fund Index, versus 10.9 percent for the Standard & Poor’s 500 Index of large-company stocks.

Paul Oranika
Editor-in-Chief
HedgeCo.Net
Email: Editor@hedgeco.net

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