Hedge fund benchmarks a risk-based approach pdf

From to , the average month alpha produced by the Credit Suisse Index was only 0. In the following four years, from to , the Credit Suisse Index saw average month alpha of 2. Alpha of 2. The years and were difficult for many hedge fund managers; there were many that did not fully believe in the rally and were too quick to sell into fear, given the dramatic bear market they had recently witnessed.

This period of negative alpha was nearly twice as long as the next-longest stretch in the early s. Some strategies have wider distributions of returns and can experience longer episodes of negative alpha relative to their more conservative peers. But if these strategies are uncorrelated and combined, the resulting diversified portfolio can create a more consistent alpha in the forward-looking environment that is compelling versus a traditional mix of stocks and bonds.

Summary When evaluating the efficacy of a hedge fund portfolio, investors should consider what they can achieve in liquid, traditional markets, and focus should be on forward-looking measures. Weak forward-looking returns for bonds may make hedge funds more appealing diversifiers in the coming years.

This article characterizes the systematic risk exposures of hedge funds using buy-and-hold and option-based strategies. Our results show that a large number of equity-oriented hedge fund strategies … Expand. This article presents some new results on an unexplored dataset on hedge fund performance. The results indicate that hedge funds follow strategies that are dramatically different from mutual funds, … Expand.

Hedge Funds: The Living and the Dead. Journal of Financial and Quantitative Analysis. Abstract In this paper, I examine survivorship bias in hedge fund returns by comparing two large databases. Results of survivorship bias by … Expand. Offshore Hedge Funds: Survival and Performance We examine the performance of the off-shore hedge fund industry over the period using a database that includes both defunct and currently operating funds.

The industry is characterized by … Expand. Survivorship Bias in Performance Studies. Recent evidence suggests that past mutual fund performance predicts future performance. We analyze the relationship between volatility and returns in a sample that is truncated by survivorship and … Expand.

Characteristics of Risk in Risk Arbitrage. Journal of Finance,. We illustrate the advantages of a pooled benchmark over alternative approaches, including the Fung and Hsieh [Fung W, Hsieh DA Hedge fund benchmarks: A risk-based approach.

Financial Analysts J. Search Search. Volume 67, Issue 12 December Volume 67, Issue 11 November Volume 67, Issue 10 October Volume 67, Issue 9 September Volume 67, Issue 8 August We find little evidence that hedge funds systematically caused market prices to deviate from economic fundamentals. PDF file. Schwartz Memorial Prize for the best paper on hedge funds.

We show that portfolios of lookback straddles can explain trend-following funds' returns better than standard asset indices. By linking fixed income hedge fund strategies to interest rate spreads, we can model the performance of these strategies when spreads are more volatile, as in the s.