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All About Hedge Funds, Fully Revised Second Edition, 2nd Edition by Ezra Zask

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CHAPTER 25Manager Selection and Due Diligence

The construction of portfolios of multiple hedge funds, whether by a fund of hedge funds (FoHF) or an investor investing directly in hedge funds, typically follows a series of steps, as shown in Figure 25–1.

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FIGURE 25–1 The Portfolio Construction Process

MANAGER SELECTION

A core function of FoHFs is to select managers from the thousands available for inclusion in their portfolio. The goal of this process is to identify managers with superior performance and risk management relative to their peers, as well as to identify any potential problems through the due diligence process. Investors identify hedge ...

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