Insights

Novus tracks six real estate-focused hedge funds in its specialization league tables, the largest of which is Long Pond Capital with $3.2 billion in reported market value. And yet Long Pond is dead last -- by a mile -- in terms of annualized alpha. It's essentially giving away 346.77 basis points versus the market.

At the top of that league table is Waterfront Capital Partners, which improves 248.95 bps over the market. No single factor is going to explain why one firm is doing so well in comparison to the market while the other struggles, but we have to consider diversification as one of them. Waterfront's top 10 positions account for only 46.4% of its portfolio, while Long Pond's account for 62.1%