Sat, Jul 2, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Infiniti Capital unveils new hedge fund ranking method

Friday, October 02, 2009
Opalesque Industry Updates – Hong Kong-based hedge funds of funds shop Infiniti Capital believes it has found a better way to quantitatively rank the risk adjusted returns of hedge funds than that used by traditional methods.

The new ranking method, called the Infiniti Single Fund Analysis (SFA) score, is included as a risk adjusted performance measure (RAPM) in Infiniti’s recently launched Infiniti Analytics Suite (IAS), a free trial of which can be downloaded from http://infiniti-analytics.com/opalesque.

Infiniti chief investment officer and IAS project originator Peter Urbani says, “We believe this method to be superior to most others in use. There is always general skepticism about new methods and a reluctance to adopt them due to corporate inertia. However, the proof of the pudding is always in the eating.

“Infiniti Capital has been using this method for the past two years,” he says. The effectiveness of any such method, based purely on historical data, is in how well today’s ranking predicts what happens tomorrow or at some future out-of-sample period. In statistical speak this is known as the predictive power of the method.

The one major advantage of any quantitative method is that users can test its performance against all other known methods quickly and easily. In a recent study, the IAS development team did exactly that, comparing the performance of a portfolio built using the SFA total score as the objective to maximize versus three other widely used RAPMs.

This study showed that by using the SFA total score as an objective function, annual returns of up to 500 basis points (5%) per year higher than those using other traditional methods were achievable.

The database used was a common set of 36 hedge funds. Significantly, the returns achieved in 2008 were much higher than those for both the equally weighted portfolio and actual hedge fund of funds which generated average returns of -19% last year.

The ratio of the absolute realised risk adjusted returns, denoted as the Compound Annual Growth Rate (CAGR) over the absolute value of the peak to trough drawdown (downside risk), was also the best for the SFA portfolio.

“The predictive power of the SFA score comes from its innovative construction, proprietary weighting and ability to identify some of the non-linear effects common to hedge funds,” Urbani says.

Unlike traditional performance measures, the SFA score is both conditional on the time period being used and relative to a large reference data set of other hedge funds. Where other methods typically standardize everything back to a normal or Gaussian distribution, the IAS uses the best fitting distributions throughout. This has the effect of calibrating the range of scores more closely to real-world data.

Urbani stresses that the method is not perfect. “The SFA scores will not provide the best returns over each and every single time period, however, over any meaningful length of time they will tend to out-perform.”

He says, “We do not force people to use the SFA scores. This is a key point of differentiation between the IAS and other software packages. Just because we have a good idea doesn’t mean everyone should use it. That’s why this is an option in the IAS along with the ability to use just about any other known RAPM for optimisation purposes or to build your own.”

Out-of-sample distribution of portfolio returns
For more on the SFA score or to download a free trial of the IAS see: Source

OR
http://www.infiniti-analytics.com/kb/kb/article/infinitisfascorearapm

What is the SFA score:
The SFA score is a percentile based measure made up of some 30 odd statistics. The score can be broken down into Risk, Return and Persistence sub-scores. It is standardized to a large reference data set of other funds making it a relative measure. It is also conditional on the time period under review.

For more information, please contact Peter Urbani on telephone +64 29 977 8811 Or email him at Source

km

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
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 - Soros, Druckenmiller among hedgies profiting in market plunge, Hedge funds were most bullish on bonds since 2004 before Brexit, Surprise Brexit vote unleashes scramble for dollars, High-yield hit on Brexit but no panic selling, Scientist turned hedge fund founder lured to pound, euro, Hedge fund avoids commodities, posts big gains[more]

    Soros, Druckenmiller among hedgies profiting in market plunge From HITC.com: Bullish positions in gold and volatility and well-timed short bets on China and emerging markets, among other areas, were some of the trades that benefited hedge funds on Friday as markets digested Britons' s

  2. Manager Profile - A 26-year old hedge fund manager called Brexit — here's what he thinks about the historic vote[more]

    From Businessinsider.com: Taylor Mann is not your typical fund manager. The twenty-six year old Texas A&M graduate manages Pine Capital in Larue, Texas (population 160), where he resides with his three-year old daughter. Also atypical compared with many of the largest funds out there, Mann makes

  3. Chesapeake Partners to liquidate hedge fund amidst 'hostile environment'[more]

    Komfie Manalo, Opalesque Asia: Chesapeake Partners Management, the hedge fund run by woman fund manager Traci Lerner said it would return investors’ money after 25 years because the market environment has become "hostile" to manage other people’s money, reported

  4. Europe - George Soros says Brexit has ‘unleashed’ a financial markets crisis, Brexit—what we know, Will the UK’s departure be a ‘soft-Brexit’ or a ‘hard-Brexit’?, Brexit: Six-point action plan for asset managers[more]

    George Soros says Brexit has ‘unleashed’ a financial markets crisis From Bloomberg.com: Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Bruss

  5. Hedge Fund Due Diligence Exchange offers complete due diligence reports at $1500[more]

    Matthias Knab, Opalesque: HFDDX is offering complete alternative investment due diligence reports at $1500 US. Industry professionals can simply go to www.hfddx.com and indicate their interest in sponsoring one or more DD Reports for $1500 each.