Tue, Mar 19, 2024
A A A
Welcome Guest
Free Trial RSS pod
Get FREE trial access to our award winning publications
Alternative Market Briefing

Paper: The real market skill for many hedge funds may be with their timing of volatility and not returns

Monday, February 20, 2017

Matthias Knab, Opalesque:

Mark Rzepczynski, AMPHI Research and Trading, writes on Harvest Exchange:

For many investment strategies, the difference between a good and a bad manager is based on their ability to manage risk. It is as much about how volatility is handled as return generation. A good strategy which does not manage risk well will never be truly successful.

A key conclusion from a recent paper that focuses on volatility and factor management show that controlling volatility provides significant enhancement for many factor-based strategies. If you control volatility, you will get a positive bump in the return to risk ratio.

This is at odds with the convention wisdom of some in finance who believe you have to be in the market during risky periods like a recession to gain extra return.

You get paid to take risk during periods like a recession. This new research says that it does not matter when you invest in the business cycle. Managing risk will improve performance and that means cutting exposure when volatility is high. Timing market volatility will help with any investment strategy because volatility is generally independent of return. Put differently, if you control the risk, you will be better off versus a simple buy and hold for a given factor exposure.

This is all explained clearly in the paper "Volatility Manag......................

To view our full article Click here

Previous Opalesque Exclusives                                  
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. KKR raises $6.4bn for the largest pan-Asia infrastructure fund[more]

    Laxman Pai, Opalesque Asia: The New York-based global investment firm KKR has raised a record $6.4bn for its second Asia-focused infrastructure fund, underlining investors' continued appetite for private markets. According to a media release from the alternative assets manager, the figure top

  2. Bucking the trend, top hedge fund makes plans for a second SPAC[more]

    From Institutional Investor: SPACs aren't dead. At least not to the folks at Cormorant Asset Management. The life sciences firm, whose hedge fund topped its peers in 2023, is confident it will match the success of its first blank-check company. Last week, the life sciences and biopharma speciali

  3. Benefit Street Partners closes fifth fund on $4.7 billion[more]

    Bailey McCann, Opalesque New York: Benefit Street Partners has closed its fifth flagship direct lending vehicle, BSP Debt Fund V, with $4.7 billion of investable capital across the strategy. Benefit Street invests primarily in privately originated, floating rate, senior secured loans. The fun

  4. 4 hedge fund themes that are working in 2024[more]

    From The Street: A poor earnings report from Tesla (TSLA) has not hurt the indexes on Thursday. The decline in Tesla stock, which is losing its position in the Magnificent Seven pantheon, is more than offset by strong earnings from IBM (IBM) and ServiceNow (NOW) . In addition, the much higher-t

  5. Opalesque Exclusive: A global macro fund eyes opportunities in bonds[more]

    Bailey McCann, Opalesque New York for New Managers: Munich-based ThirdYear Capital rebounded in 2023, following a tough year for global macro. The firm's flagship ART Global Macro strategy finished the year up 1