Neutralizing Betas without Neutralizing Alphas in Funds of Hedge Funds

32 Pages Posted: 4 Apr 2008

See all articles by Craig W. French

Craig W. French

Portfolio Engineering Laboratory

Jim Kyung-Soo Liew

Johns Hopkins University - Carey Business School

Date Written: November 29, 2004

Abstract

Identification of the relevant factors that drive hedge fund returns is an important component to institutional quality fund of funds investing. We focus specifically on the importance of analyzing the alpha and beta return generators. Additionally, we discuss tail-risk management and the practical methods for mitigation of the point mis-estimation problem in mean-variance optimization of portfolios of hedge funds.

Keywords: hedge fund, factor model, serial correlation, portfolio construction, asset allocation, skew

JEL Classification: G00

Suggested Citation

French, Craig W. and Liew, Jim Kyung-Soo, Neutralizing Betas without Neutralizing Alphas in Funds of Hedge Funds (November 29, 2004). Available at SSRN: https://ssrn.com/abstract=1116022 or http://dx.doi.org/10.2139/ssrn.1116022

Craig W. French (Contact Author)

Portfolio Engineering Laboratory ( email )

115 Pondview Drive
Washington Crossing, PA Pennsylvania 18977
United States
6108446040 (Phone)

Jim Kyung-Soo Liew

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

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