Inheriting all valuation problems of individual funds, portfolios of hedge 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.

HFoF 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 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 HFoF 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 covering all investments risks on alternative vehicles.

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 HFoF 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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