RT Journal Article
SR Electronic
T1 Funds of Hedge Funds Take the Wrong Risks
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 108
OP 121
DO 10.3905/jpm.2007.684758
VO 33
IS 3
A1 Stan E Beckers
A1 Ross Curds
A1 Simon Weinberger
YR 2007
UL https://pm-research.com/content/33/3/108.abstract
AB On average the fund of hedge funds industry over the last 15 years has delivered alpha with a high information ratio. Unfortunately, these alphas come with significant common-factor exposures for which the typical fund was unrewarded. While funds of hedge funds can deliver a valuable product, sloppy manager selection and portfolio construction typically result in less-than-pure alpha generation. A naive selection of a fund of hedge funds may thus lead to assuming relatively expensive common-factor exposure without necessarily accessing significant skill-based returns. A multifactor modeling of fund of hedge fund returns can help to identify skillful value-added.TOPICS: Real assets/alternative investments/private equity, portfolio construction