Style Sticks Out in Hedge Fund Buy Criteria

March 31, 2003 ( - When it comes to investing in hedge funds, investors are more prone to consider strategy or style than manager experience, performance, or fees, according to a new survey.

In fact, nearly half of respondents to a survey by Deutsche Bank AG say they consider a manager’s strategy or style in deciding whether to invest, while just over a quarter are concerned with a manager’s previous experience and only about one-fifth look at the fund’s returns, according to Dow Jones.

Just 1% consider fees, while only about 2% consider the age of the fund, according to the report.

And despite hedge funds’ long-standing reputation for secrecy, most hedge fund investors are requiring some level of disclosure from the funds.   Over a third require managers to provide detailed information about the holdings and risk in their portfolios, while another 61% require at least a limited amount of information about the fund portfolio.

Just 3% said they will invest with managers who keep them completely in the dark about how they make money, according to the survey of 376 pension funds, university endowments, charitable foundations, and wealthy families with more than $350 billion in hedge fund assets.

The survey found that word of mouth is still the number one way that investors discover hedge funds.