Fund Of Funds Risk Assessment

Inheriting all valuation problems of individual funds, portfolios of hedge funds (Hedge Fund of Funds - HFoF) are prone to additional issues. First, HFoFs tend to exhibit higher negative skewness and kurtosis than individual hedge funds. Therefore, the inappropriateness of the mean-variance theory that assumes a normal distribution, applies to HFoF to a higher extent. Second, the diversification of portfolio constituents leads to a higher portfolio correlation with major markets than that of individual funds. Third, high cross-correlations across underlying funds and indices make portfolio factor analysis more difficult - often classic regression models do not work and more advanced techniques should be applied.

Hedge Fund Of Funds Valuation Challenges

  • A greater degree of non-normality of return distributions than individual funds
  • High correlation with indices
  • Cross-correlations of underlying funds

What We Can Do For You

  • Advanced hedge fund portfolio factor analysis (Kalman filters, Elastic-net, LASSO, AIC etc.)
  • Portfolio stochastic simulation
  • Marginal risk contribution analysis
  • Portfolio Sensitivity analysis
  • Principal Component analysis
  • Stress testing incl. correlation stressing
  • Portfolio What-if analysis
  • Distribution adjustment analysis
  • Structured products' analysis (on-demand)
  • Crossr-correlation analysis

Services & Research On-demand

Accounting, hedge fund risk valuation and portfolio construction consulting services on-demand

Fund Risk Assessment

Risk assessment of hedge funds across a broad range of risk models tailored to alternative investments.

Portfolio Risk Assessment

Risk assessment and valuation of Hedge Fund of Funds and multi-asset investment portfolios.

 

Portfolio Construction

Hedge fund portfolio construction: manager selection, portfolio optimization and risk analysis. 

 

Portfolio Optimization

Optimization of hedge fund of funds and multi-asset portfolios across a broad range of objective functions.

Due Diligence

Comprehensive quantitative and qualitative Due Diligence on hedge funds covering all investments risks.

Style Analysis

Manager Style analysis based on multi-factor models and designed for alternative investments.

 

Strategy Enhancement

Strategy enhancement solutions to improve risk-return profiles of fund of funds and multi-asset investment portfolios. 

Accounting Services

FoHF accounting services during the initial implementation and on an ongoing basis throughout the year.

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