In this brief note we argue that for investors that are serious about matching (the risks of) assets and liabilities, indexation is a doubtful proposition as significant autonomous changes may occur in the industry allocation and accompanying risk-return profile of the portfolio underlying the...

Using monthly return data over the period June 1994 – May 2001 we investigate the performance of randomly selected baskets of hedge funds ranging in size from 1 to 20 funds. The analysis shows that increasing the number of funds can be expected to lead not only to a lower standard deviation...

In 1999 the Financial Services Authority recommended that a standard repayment mortgage was the “best advice” for Independent Financial Advisors to give to essentially all new mortgage customers seeking the best value repayment vehicle. The FSA simply followed the recommendation of the 1999...

Using monthly return data on 455 hedge funds over the period 1994-2001 we study the diversification effects from introducing hedge funds into a traditional portfolio of stocks and bonds. Our results indicate that although the inclusion of hedge funds may significantly improve a portfolio’s...

The Financial Services Authority’s review of With Profits policies has been motivated by a perception that consumer understanding of these products is insufficiently developed. This paper suggests that these concerns have not so much been overstated as misguided. With profits policies are...

Although the inclusion of hedge funds in an investment portfolio can significantly improve that portfolio’s mean-variance characteristics, it can also be expected to lead to significantly lower skewness and higher kurtosis. In this paper we show how this highly undesirable side-effect can be...

In this paper we investigate whether there are any significant differences in the ability of constant and time-varying expected return asset pricing models to detect superior performance in hedge funds. Our results strongly suggest that the static models traditionally employed to measure and...

In this paper we study the persistence and predictability of several statistical parameters of individual hedge fund returns. We find little evidence of persistence in mean returns but do find strong persistence in hedge funds’ standard deviations and their correlation with the stock market....

We study the diversification effects from introducing hedge funds into a traditional portfolio of stocks and bonds. Our results make it clear that in terms of skewness and kurtosis equity and hedge funds do not combine very well. Although the inclusion of hedge funds may significantly improve a...