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White Papers

CS/Tremont Hedge Fund Index Performance 1994-2009 Review

 

Hedge Fund Allocation: A Look at Current Diversification Benefits

 

The Beryl Consulting Group LLC
September 2, 2009
By: Rich Wenzel
 
Abstract
Given today’s investing environment, diversification is mandatory. This paper shows that even a simple volatility minimization optimization using historical data can significantly lower risk when investing in hedge funds. Using data from 2002 to 2008, our results show that a naïvely diversified hedge fund portfolio (equal weighted across hedge fund strategy types) has on average 40% more volatility than an optimized portfolio with the same return expectations. Our methodology is simple and practical in its approach and easily replicable.