HEDGED.BIZ

A look at economics, markets, finance and the irrational human being

Correlation and Risk

We would like to know what risk we are running in our portfolio which consists of a clutch of hedge funds. To do this we measure the individual volatilities of each hedge fund. We also need to know how these funds relate to one another. Question: Do we measure the correlation of returns of each
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The Importance of Track Record in Hedge Fund Investing

Let’s do a little experiment. Lets take 1000 fair coins. Let’s give them names and flip them to see which ones come up heads and which ones come up tails. Now let’s take another 1000 fair coins and do the same, given them unique names and flip them recording which ones come up heads and
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Performance of Hedge Funds in 2006. How did the Big Name Hedge Funds do?

2004 and 2005 were terrible years for hedge funds. If the HFRI Index is anything to go by, the average hedge fund returned 9.05% in 2004 and 9.27% in 2005. Performance in years 2001 and 2002 were worse but those years saw equity markets in free fall. 2003 was a recovery year in equities and
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Further evidence that hedge fund managers don’t always know what investors want

Just yesterday I was talking to a fund manager from Australia. He had launched an equity and equity options fund two years ago, performance had been good and he was on the road to raise capital. His pitch was to launch immediately into the options trading strategy, which was fairly sophisticated and interesting. He spent
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Some evidence that hedge fund managers don’t always know what investors want

I was doing the usual rounds in Connecticut visiting hedge fund managers a couple of months ago and I was talking to a convertible arbitrage manager who was seeking to grow his business. The said fund had had a long track record of success in the field of convertible arbitrage chalking up an average performance
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