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which are not reflected in the typical benchmark. Thus, the putting together of these managers may be like comparing apples and oranges.

The various available benchmarks often have different objectives and are calculated in different ways. Some may be dollar-weighted while others are equal-weighted. Some attempt to be universal while others are representational. Thus, it is best to use one benchmark and stick with it rather than use various ones in different junctures to prove different points.

Despite these drawbacks, benchmarks are useful in that they provide a guide to performance. While they should not be taken as the ultimate truth, they provide a sense of performance and comparison for those who require it. In some cases, customized benchmarks may be the answer for specific investors that take into account the particular strategies and markets they allocate to.

Several organizations are creating investable hedge funds that are intended to track their benchmarks. The benefits of such funds are the ease and convenience they bring to the investors, saved costs from the investor not having to do manager searches, circumvention of the problem of finding managers who can perform well over time, and avoidance of manager disasters and blowups. Unlike a fund of funds that attempts to select the best managers and outperform the market, the index funds are trying to deliver market returns.

VARIATIONS ON EXIT STRATEGIES

While we've seen the old generation of hedge fund manager have difficulty with succession planning, one interesting trend is the development of investment holding companies. They are similar to those set up by mutual funds in the 1960s and are viewed by some hedge fund managers as a partial exit strategy. Asset Alliance, XL Capital, Capital Z, and Value Asset Management are a few such companies.

Asset Alliance, which generally purchases about a 50 percent stake in alternative investment managers with assets of between $50 million and $500 million, has bought an interest in Beacon Hill Asset Management, Bricoleur Capital Management, JMG Capital Management, Liberty Corner Asset Management, Metropolitan Capital Managers, Milestone Global Advisors, Pacific Asset Management, Silverado Capital Management, Trust Advisors, Wessex Asset Management, and most recently in 2001, P/E Investments and Zola Capital Management.