•  
• Tweet
•  
•        Print
•  
•         Track Keywords
•  
• 

Opalesque Exclusive: Stonebrook launches hedging program for fund of hedge funds based on 30% alternative beta ratio Stonebrook Capital Management LLC has announced the launch of a proprietary hedging program designed for funds of hedge funds.

In the fall of 2007 Chief Investment Officer Jerome Abernathy, and Head of Research Ahmad Ajakh completed a study on alternative beta (AB) and its use as a tool in the construction of hedge fund portfolios. Abernathy, speaking about the research - which was based on 14 years of back testing a 30% AB ratio, said that alternative beta “materially improves the liquidity characteristics of the portfolio, enables investors to concentrate on identifying and investing in high alpha managers and reduces headline risk.”

Stonebrook is now taking this strategy out to funds of hedge funds, “What makes this program powerful is that it has demonstrated outsized return during down months for the hedge fund industry as a whole, precisely when managers need it most.” The program, implemented through a managed account or special purpose fund is projected to have a capacity of $3bln (under current market conditions).

The program was back tested over five years against the HFR Funds-of-Funds Index and using a 30% hedge ratio it would have increased the net returns of the index by more than 60 basis points, reduced annualized volatility by 11.7% and improved Sharpe ratio by almost 30%. “We believe that this strategy can be an ......................

To view our full article Click here