Dealing with Myths of Hedge Fund Investment

CFA Digest ◽  
1999 ◽  
Vol 29 (3) ◽  
pp. 95-96
Keyword(s):  
Hedge Fund ◽  
Fund Investment

Hedge fund investment strategies: Actual practice

2019 ◽  
Vol 25 (11) ◽  
pp. 2594-2605
Author(s):  
A.A. Mishin ◽  
Keyword(s):  
Hedge Fund ◽  
Actual Practice ◽  
Investment Strategies ◽  
Fund Investment

scholarly journals Hedge Funds: Do They Do What They Say They Do?

2010 ◽  
Vol 8 (10) ◽  
Author(s):  
Scott P. Mackey ◽  
Michael R. Melton
Keyword(s):  
Hedge Funds ◽  
Hedge Fund ◽  
Strongly Correlated ◽  
Ample Evidence ◽  
Investment Style ◽  
Funds Of Hedge Funds ◽  
Standard Linear ◽  
Style Indices ◽  
Fund Investment ◽  
Hedge Fund Returns

<p class="MsoNoSpacing" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><span style="color: black; font-size: 10pt; mso-themecolor: text1;"><span style="font-family: Times New Roman;">The purpose of this research is two-fold, to determine if hedge funds follow their stated strategy styles and to examine how hedge funds&rsquo; strategy allocations evolve over time in response to changed economic and market conditions.<span style="mso-spacerun: yes;">&nbsp; </span>Our key advance is that we show that standard linear style models like that of Sharpe (1992) can be applied to hedge fund returns as long as the returns of the style indices in the model themselves display the nonlinear option-like characteristics of hedge fund returns.<span style="mso-spacerun: yes;">&nbsp; </span>For our research, the returns of our sample of Funds of Hedge Funds are strongly correlated to the returns of portfolios of hedge fund investment style indices. <span style="mso-spacerun: yes;">&nbsp;</span>In this way, we capture the spirit of Fung &amp; Hsieh's (2002) Asset-Based Style Factors for Hedge Funds.<span style="mso-spacerun: yes;">&nbsp; </span>Based on our results, it appears that the answer to the first question is &ldquo;somewhat&rdquo;, while we find ample evidence of significant shifts in allocation among the Fund of Hedge Funds from the first sample period (1997-2001) to the second (2002-2006).<span style="mso-spacerun: yes;">&nbsp; </span>The changes in allocation appear to rationally reflect the changed economic conditions and investment opportunities existing at the time.</span></span></p>

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