BGI CEO tells FT about “artificial distinction” between hedge and long-only
| Nov 9th, 2006 | Filed under: Portable Alpha & Alpha/Beta Separation | By: Alpha Male |
|
By: Deborah Brewster, Financial Times
Published: November 9, 2006
Blake Grossman, CEO of BGI, articulates a point that is central to alpha-centric investing: that the terms “alpha” and “beta” are not synonymous with “hedge” and “long-only”. Says FT:
“The head of Barclays Global Investors, the world’s biggest money manager, has said the distinction between hedge funds and the mainstream asset management business has become increasingly ‘arbitrary’ as the two industries converge.
“Blake Grossman, chief executive of BGI, told the Financial Times in a rare interview: ‘The notion that there is a traditional way of investing that is long only, and then there is hedge funds, is crazy. We’re seeing real convergence. We’re getting mandates to employ some degree of short-selling, some degree of derivatives . . . If you look out five years, there will be much less of a divide between what’s considered a hedge fund and what’s considered a traditional strategy.’”
[...] Hedge funds are the quintessential actively managed funds. In November, Blake Grossman, CEO of BGI told the Financial Times: “The notion that there is a traditional way of investing that is long only, and then there is hedge funds, is crazy. We’re seeing real convergence. We’re getting mandates to employ some degree of short-selling, some degree of derivatives . . . If you look out five years, there will be much less of a divide between what’s considered a hedge fund and what’s considered a traditional strategy.” [...]
[...] As we’ve reported here before, it seems BGI has its sights set beyond beta. In November, Blake Grossman, BGI CEO told FT of the “artificial distinction between hedge funds and long-only funds”. Said Grossman: “The notion that there is a traditional way of investing that is long only, and then there is hedge funds, is crazy. We’re seeing real convergence. We’re getting mandates to employ some degree of short-selling, some degree of derivatives . . . If you look out five years, there will be much less of a divide between what’s considered a hedge fund and what’s considered a traditional strategy.” [...]
[...] Opalesque’s Matthias Knab reported from Hedge Fund Investments Japan IQ 2007 in Tokyo last week about comments from BGI’s Stan Beckers on alpha/beta bifurcation.  His alpha-centric views echo those of his boss Blake Grossman (see related posting).  Reports Knab: “At a hedge fund conference in Tokyo this week, Stan Beckers, Managing Director and Head of Alpha Management Group at Barclays Global Investors, said the new 130/30 is a ‘first step leading to a decomposition of the current asset management practices.’  Even today, most alternative products would come as ‘pre-packaged combinations of beta and alpha. Why?’, he asked, should investors continue to purchase these products at inflated prices ‘when you can buy them separately’, he said in a session dedicated to Portable Alpha.” [...]