Investment Mandates for Hedge Funds by Frances Cowen, Article Critique Example

Hedge funds are forms of investment that were specifically designed to provide higher returns for investors who are willing to face higher risks. The capacity of the investment to provide as much returns as possible is often regarded as the reward to investors who are willing enough to go through all the risks. But is this always necessary? The article of Frances Cowen tries to evaluate the possibilities by which hedge funds would still provide the high returns without the necessity of putting the investments into several risks.

Among the matters indicated as necessary for the assumption of better hedge funds is that of the employment of better managers into the system. It is insisted that better managers provide better instances of earning as they know how to go about the system based on their profile performance. Relatively, the assessment used by the author regarding this matter was based upon the occurrence of risks especially when it comes to having several managers of the investments and having single mangers. The comparison of such performance between managers have been seen to have a great impact on the lowering of the amount being used to support the hedge fund’s life (3).

Another matter considered is the fact that the process of tracking error computations help in protecting hedge funds from incurring several losses due to unforeseen risks in the market. The manifestation of errors early on provides a great impact on how the measure of returns could be projected by the investors (4). In relation to this, the consideration of the author on the matter makes a definitive course of providing a guideline on how both the involvement of a single manager and the condition of tracking error computations could best help collaboratively to lessen risks while retaining or even increasing the possibility of returns that could be gained from the funds being projected.

In relation to examining hedge funds and the investment’s capacity to provide as much revenue returns as expected, the article of Cowen was rather effective and could be considered practical for application. Although it is suggested that the article could have specifically involved more points of assessment and examination, focusing on the two most important aspects of the investment at this point is considered helpful and relatively distinctive in the process of improving investment confidence on hedge funds.

Reference:

Frances, Cowen. Investment mandates for hedge funds. Pensions : An International Journal 9. 2 (Dec 2003): 136-147.