Odd Lots Why Asset Allocators Love Multi-Strategy Hedge Funds
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May 26, 2025 
Ronan Cosgrave, a partner at Albourne Partners, specializes in advising institutional investors on hedge funds and alternative assets. In this discussion, he highlights the recent surge in popularity of multi-strategy hedge funds among big investors. Cosgrave breaks down what makes these funds attractive, emphasizing factors like operational models, compensation structures, and performance accountability. He also examines how talent competition and team dynamics impact these funds' success and performance, shedding light on the intricacies of hedge fund management.
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Differences in Multi-Strategy Fee Models
- Multi-strategy hedge funds vary significantly in internal structure and fee models.
- Pod shops use a three-layer fee system, while traditional funds often use a simple two and 20 model.
Netting Risk in Pod Shops
- Paying performance fees at the PM level creates netting risk for pod shops.
- This risk can cost about 1% annually and negatively impact overall fund performance.
Compensation Shapes Pod Shop Culture
- Pod shops balance competition and cooperation depending on compensation structure.
- Pure "eat what you kill" models foster competition but risk PM burnout, while cooperative models risk higher internal correlation.