Imagine waking up to discover that decades of data on stocks never included key industries (technology anyone?), making every major index misleading and leaving people to question everything about their equity portfolios, including how much they’ve invested, the risk. and expected long-term returns. With hedge funds, this isn’t just a thought experiment—it’s an unsettling truth. And a fix matters to both hedge funds and investors.
In episode 10, Julie talks to Jon Caplis, CEO of PivotalPath, which was built for institutional investors to do due diligence on hedge funds. PivotalPath, which Jon founded in 2013, now serves institutions with a total of $400 billion in hedge fund investments. In today’s episode, Jon discusses how incomplete data has fed flawed benchmarks and how it all turned into a nagging problem and open secret for the industry. Jon gives his view on how it happened in the first place, why resolving the problem now is particularly important and has gained support, recent research that quantified the detrimental effects for both investors and managers, and what could happen to landmark academic studies on hedge funds that have been based on incomplete data. Take a listen and email me with your thoughts and ideas at jsegal@institutionalinvestor.com.
Links:
II Article: Everything Investors Know About Hedge Funds Is Based on Flawed Data https://www.institutionalinvestor.com/article/2d7om8w3w5brlcvefot1c/portfolio/everything-investors-know-about-hedge-funds-is-based-on-flawed-data
Study: What Do We Know About Institutional-Quality Hedge Funds? https://uncipc.org/index.php/publication/institutional-quality-hedge-funds/
PivotalPath Index App