van_rebuttal

van_rebuttal - Hedge Fund Commentary From VAN January 2005...

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George Van, Chairman, with Zhiyi Song, PhD, CFA, Vice President One Burton Hills Blvd., Suite 375, Nashville, TN 37215 Van Hedge Fund Advisors International, LLC Tel: 615.377.2949 or 800.422.2949 Fax: 615.377.8730 Van Money Manager Research, LLC Email: vhfai@vanhedge.com Website: www.hedgefund.com Historical Hedge Fund Returns Fairly Represent Performance Malkiel-Saha Hedge Fund Paper Flawed Hedge Fund Commentary From VAN January 2005 A Commentary by George P. Van, Chairman, with Zhiyi Song, PhD, CFA, Vice President
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H i s t o r i c a l H e d g e F u n d R e t u r n s F a i r l y R e p o r t e d 2 Malkiel-Saha Hedge Fund Paper Flawed Van Hedge Fund Advisors International, LLC Van Money Manager Research, LLC T a b l e o f C o n t e n t s : Page 1 . B a c k g r o u n d 3 2. Malkiel-Saha Paper Flaws and Our Comments on Potential Biases 4 3. Validation Studies of the Van Global Hedge Fund Index 8 4 . A H e l p i n g H a n d 1 0 5 . S o m e I n t e r e s t i n g I r o n i e s 1 5 Appendix A: Van Index Methodology 18 Appendix B: List of Exhibits 33 E x p l a n a t o r y N o t e s 3 4 S e l e c t e d S o u r c e s 3 5 Acknowledgements Our thanks to these VAN officers, for their thoughts and contributions: Daniel Hayden, Managing Director John Van, Managing Director Timothy Weaver, Vice President Thomas Whelan, President and CEO
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H i s t o r i c a l H e d g e F u n d R e t u r n s F a i r l y R e p o r t e d 3 Malkiel-Saha Hedge Fund Paper Flawed Van Hedge Fund Advisors International, LLC Van Money Manager Research, LLC 1. Background Recently, a paper on hedge fund (“HF”) databases and indices, entitled “Hedge Funds: Risk and Return” (“paper”) was released to the major media. Its authors were Burton Malkiel and Atanu Saha, both economists. Malkiel and Saha use an unrepresentative sample and then generalize that other HF indexes are similarly flawed. Mr. Malkiel is associated with the mutual fund industry. He has been a director of Vanguard since 1977. Vanguard is the largest mutual fund provider of index funds and the third largest mutual fund company. He also has been a director of another index provider, Active Index Advisors. Evidence shows the mutual fund industry is becoming increasingly concerned about the rise of HFs. Malkiel also is a proponent of the proposition that you can’t beat general market indexes – which HFs have. In fact, he has built his career on this proposition. His co-author, Mr. Saha, is billed on his company website as “an expert in damage analysis” and “litigation”. The Malkiel-Saha paper, with its numerous flaws, does a disservice to both investors and the media. Note: VAN refers to Van Hedge Fund Advisors International, LLC and its affiliates, while VMMR refers specifically to Van Money Manager Research, LLC.
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H i s t o r i c a l H e d g e F u n d R e t u r n s F a i r l y R e p o r t e d 4 Malkiel-Saha Hedge Fund Paper Flawed Van Hedge Fund Advisors International, LLC Van Money Manager Research, LLC 2.
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van_rebuttal - Hedge Fund Commentary From VAN January 2005...

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