Making Sense A CIO’s view: Insights from 30 years of hedge fund investing
Jul 11, 2025
Paul Zummo, Chief Investment Officer of J.P. Morgan Alternative Asset Management, shares insights from three decades in hedge fund investing. He reflects on how the industry has evolved from limited data to a focus on quantitative strategies and emerging managers. Zummo discusses the significance of risk management and due diligence in selecting hedge fund managers. He highlights the importance of cultural assessments and networking, along with the complexities of maintaining a balanced portfolio that includes early-stage managers.
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Evolution of Hedge Fund Investing
- Hedge fund investing has drastically evolved with data availability, strategy diversification, and risk management improvements.
- Early challenges included manager identification without the internet and dominance of macro and long-short strategies.
How a 30-Year Hedge Fund Journey Shapes Winning Investment Strategies
Paul Zummo highlights how hedge fund investing has evolved drastically over 30 years, emphasizing the importance of skepticism, detailed due diligence, and risk management.
Key insights include:
- Being a skeptic to identify weak spots and understanding where a strategy could fail, not just its current performance.
- 'Running into fires,' or capitalizing thoughtfully on market dislocations, is crucial for successful investing.
- Holding investments requires strong counterparty relationships and awareness of financing risks.
- Due diligence should involve deep referencing and cultural assessments to understand how a manager operates and reacts under stress.
- Investing in early stage, emerging managers is vital, as they often outperform established ones.
- Quantitative funds require extensive, nuanced due diligence covering hundreds of factors to identify true edge.
These principles, combined with a culture of long-term relationships and client-focused portfolio construction, have driven JP Morgan's hedge fund success.
Skepticism in Manager Selection
- Be skeptical in manager selection but maintain a balance between skeptics and optimists on your team.
- Underwrite managers rigorously by focusing on risks and scenarios that could break the strategy over long-term horizons.