Allocators on manager selection at Hedgeweek US Summit

Ahead of the Hedgeweek US Summit in New York on 8 October, George Evans of Aksia, Jackie Rosner of PAAMCO Prisma and Paul Zummo of J.P. Morgan Alternative Asset Management joined a Hedgeweek Coffee Chat to discuss manager selection, due diligence and portfolio construction.

The conversation examined how allocators separate skill from luck and how factors such as crowding, leverage and shifting factor exposures are influencing portfolio design. The panel discussed the need for repeatable decision-making and clear risk controls when evaluating managers.

The allocators used a concise rule of thumb: “Don’t buy the view, buy the process. Views change, process persists.” They emphasised looking for investment approaches that have worked across different market conditions rather than one-off successful trades.

On due diligence, the panel addressed practices that go beyond the prepared pitch. Allocators review historical performance on a risk-adjusted basis, study how managers performed in down markets, and check that stated exposures align with actual trading. Operational checks, verification of incentive alignment and ongoing monitoring were described as routine parts of selection.

Discussion of portfolio construction focused on correlation and concentration. With some strategies showing signs of crowding and leverage levels shifting, allocators reported placing more weight on portfolio-level stress testing and scenario analysis to see how holdings might move together under stress and to limit unintended concentrated exposures.

Panelists said managers now need to show operational depth beyond the pitchbook. Examples include documented risk limits, clear descriptions of how hedges are implemented, procedures for executing portfolio shifts, and disclosure on liquidity and margining practices. Allocators noted that understanding how leverage can amplify losses as well as gains is part of the assessment.

Evans, Rosner and Zummo will continue the discussion during the closing allocator panel at the Hedgeweek US Summit on 8 October, where they will speak to a wider audience of allocators and managers. Hedgeweek organises the summit as a forum for allocators, managers and service providers to discuss trends in alternative investments.