What does it take for a hedge fund to be of "institutional quality"? A paper published in the Journal of Portfolio Management , Frederick Dopfel, a senior strategist for Barclays Global Investors, provides some suggestions.

For a hedge fund to be of "institutional quality", there must be "an unambiguous separation of alpha and beta from total returns" and skilful judgment from the investor that the fund manager "has the ability to produce a positive expected pure alpha," writes Dopfel. He says that by identifying the systemic exposures, the investor can understand how an allocation to the hedge fund impacts overall portfolio risk via the ...