Submitted by: Submitted by warren
Views: 402
Words: 443
Pages: 2
Category: Business and Industry
Date Submitted: 01/07/2011 04:57 AM
Hedge Funds VS S & P 500
The Omega fund is ignored because it has only two-year track record.
Suggestion
•David should create the new fund of hedge funds. •The recommended composite should be optimized.
Recommended Composite VS S & P 500
45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0%
S & P 500 Composite
1987
1988
1989
1990
1991
1992
1993
Annualized Return Recommended Composite S & P 500 24.6% 13.5%
Standard Deviation 9.8% 16.0%
Porportion
Return/ Risk 2.51 0.84
The correlation between the recommended composite and S & P 500 is 0.49
Optimized Result 1
Result 1: Maximize the return, maintain the standard deviation of 9.8% Return/ Annualized Standard Proportion Risk Deviation Return Steinhardt 22.4% 13.9% 0% Tiger 27.5% 19.1% 42% Zweig 27.0% 10.9% 43% Regal 21.8% 12.6% 15% Knott 19.0% 9.5% 0% Optimized Composite 27.6% 9.8% 2.81 Original Composite 24.6% 9.8% 2.51 S & P 500 13.5% 16.0% 0.84
45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0%
S & P 500 Composite Optimized Composite
The correlation between the optimized composite and S & P 500 is 0.56
1987
1988
1989
1990
1991
1992
1993
Optimized Result 2
Result 2: Minimize the standard deviation, maintain the return of 24.6% Return/ Annualized Standard Proportion Risk Deviation Return Steinhardt 22.4% 13.9% 22% Tiger 27.5% 19.1% 28% Zweig 27.0% 10.9% 2% Regal 21.8% 12.6% 48% Knott 19.0% 9.5% 0% Optimized Composite 24.6% 4.2% 5.86 Recommended Composite 24.6% 9.8% 2.51 S & P 500 13.5% 16.0% 0.84
45.0%
The correlation between the optimized composite and S & P 500 is 0.37
40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0%
S & P 500 Composite Optimized Composite
1987
1988
1989
1990
1991
1992
1993
Suggestion for concerns
• Select different hedge funds to diversify risk. • Limit the proportion of fund of hedge funds in the whole common fund. • Assess the...