@article {Beckers108, author = {Stan E Beckers and Ross Curds and Simon Weinberger}, title = {Funds of Hedge Funds Take the Wrong Risks}, volume = {33}, number = {3}, pages = {108--121}, year = {2007}, doi = {10.3905/jpm.2007.684758}, publisher = {Institutional Investor Journals Umbrella}, abstract = {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}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/33/3/108}, eprint = {https://jpm.pm-research.com/content/33/3/108.full.pdf}, journal = {The Journal of Portfolio Management} }