Calculating Dynamic Alpha: Axiom Valuation's Solution For Improved Hedge Fund Investment Performance Monitoring
May 20, 2010 Axiom Valuation, a leader in fair valuing alternative investor interests, has introduced a new service which helps investor entity managements determine whether their Hedge Fund managers are delivering Dynamic Alpha. Dynamic Alpha measures whether AI managers consistently produce additional return relative to a passively managed replicating portfolio of equivalent systematic risk.

According to Dr. Stanley Jay Feldman, Axiom Valuation's Chairman and developer of the Dynamic Alpha system, "Dynamic Alpha creates major benefits for investors including:

  1. assess risk adjusted performance of current HF managers
  2. determine whether HF manager fee structures are sensible in light of Dynamic Alpha performance
  3. provide the investment policy committee with a data driven process for the evaluation and selection of new HF managers and
  4. validate HF NAVs to insure that investors are protected from financial fraud."

Dr. Feldman noted that traditional benchmarking, while useful at a cursory level, does not provide endowments, foundations and pension plans with sufficient information to both vet and understand the risk/reward factors they are taking on with their Hedge Fund Investments. Dr. Feldman notes: "There really is no substitute for Dynamic Alpha modeling if what one wants is to accurately measure the risk/return profile of a HF investment and the contribution that the HF manager is making to the fund's return."

Disclosure and Performance Is What Today's Investor Entity Management Requires of Their Asset Managers and Advisors

Evaluating a HF manager's performance requires more transparency, disclosure and some incredible due diligence; it is not always possible to do that with today's constrained resources and budgets. Over the past two years, fair value work has moved beyond following general purpose benchmarks. "Aside from Dynamic Alpha having a high level of theoretical appeal, it offers clients a way to measure and monitor performance at a uniquely attractive price point states Dr. Feldman. What is really exciting for Axiom Valuation states Dr. Feldman, "is that clients do not have to break the bank to insure that their managers are indeed earning their fees and the value of self-reported HF interest are measured properly. This is a major breakthrough."

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For more information, please contact John Roberts at: or call at
781 486 0100x208.

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