Mon, Aug 31, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Hedge funds add value to balanced portfolios but investment process and strategies are important

Tuesday, April 24, 2012

From Precy Dumlao, Opalesque Asia – In SEB Group’s latest report titled, "Hedge funds – avoiding a simplistic approach," the Nordic bank which describes itself as a relationship bank, has concluded that hedge funds add value to balanced portfolios. But it warned though that it is very important to include a process that identifies hedge funds with distinct targeted characteristics and to mix the strategies that suits the specific contest.

In the report, SEB has found that the hedge fund industry’s limited diversification was exposed at the height of the global financial crisis in 2008 at a crucial time when investors needed it most. Last year again tested investors’ patience as the industry was pummelled with performance challenges.

"The potential for alpha has been suppressed by more crowded markets and technological progress. This means selection is key – to either identify funds with better than average alpha or those offering superior diversification," SEB said.

In a balanced portfolio, hedge funds with average characteristics are not attractive even in an optimistic alpha scenario where the Sharpe ratio is elevated – as the correlations with other assets are too high, the report said and added, "On the other hand, diversifying strategies are attractive even in a conservative (no alpha) scenario, where they make up 4-8% of a balanced portfolio depending on risk profile (chart 2, where the re......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Hedge funds suddenly find real money is back in Argentina's debt, Elon Musk buys more SolarCity stock following hedge fund manager short, BlackRock plans to get into rental-home financing[more]

    Hedge funds suddenly find real money is back in Argentina's debt From Bloomberg.com: The real money is back in Argentina. Before the country’s default in July 2014 (its second in 13 years), most long-term investors abandoned its bond market. As they rushed out, Argentina became a favorit

  2. Activist News - Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping, Meet Europe's best activist investor[more]

    Carl Icahn has snapped up a huge stake in Freeport-McMoRan, and the stock is ripping From Businessinsider.com: Carl Icahn has picked his next target: Freeport-McMoRan. Icahn and a group of other investors have snapped up an 8.46% stake in mining company Freeport-McMoRan, according to a j

  3. North America - Hedge fund manager Ray Dalio’s challenge to the Fed[more]

    From Newyorker.com: For some reason, Janet Yellen, the chair of the Federal Reserve, decided to skip this year’s annual Fed conference in Jackson Hole, where monetary policymakers from the United States and abroad get together with some prominent academics to discuss the big issues of the moment. Th

  4. Opalesque Exclusive: Credit-focused hedge fund Numen Capital expects more volatility in Europe in coming months[more]

    Benedicte Gravrand, Opalesque Geneva: A London-based hedge fund, which has just hired two emerging managers, is cautious on Europe. Vassilis Paschopoulos and former Lehman’s colleague Nikos Kargadouris, launched a London-based credit-focused hedge fund called

  5. Performance - Hedge funds bruised by stocks’ meltdown, Capstone’s volatility hedge fund is having a monster month thanks to market mayhem[more]

    Hedge funds bruised by stocks’ meltdown From WSJ.com: Hedge-fund managers like to promise their investors protection from market swings. In the recent stock swoon, many were caught off guard. Billionaire managers such as Leon Cooperman, Raymond Dalio and Daniel Loeb are deeply in the red

 

banner