Glossary

absolute return Absolute return refers to the return on an investment, expressed in a base currency such as dollars in percentage terms. The return is relative to itself. Absolute returns can be reported either gross or net of fund fees and expenses. In most cases, only net returns are used by hedge funds when reporting their monthly performance to investors.

administrator An administrator is the institution, generally a bank, responsible for all the administrative duties required to account for the monthly performance of a fund and reporting to investors.

alpha Alpha is the measure indicating a manager's risk-adjusted excess rate of return relative to a benchmark. It measures a manager's added value in selecting individual securities, independent of the effect of overall market movements.

asset allocation model An asset allocation model is a formulaic tool used by portfolio managers to allocate capital to managers in a way that maximizes return or minimizes risk, subject to portfolio constraints.

auditor The auditor is the fund service provider that provides the fund's annual independent audit, annual tax services, and periodic business consulting services to a fund. Only one auditor is associated with each fund.

average monthly return The average monthly return is the sum of all monthly returns in a reporting period divided by the number of periods.

beta Beta is a measure of the returns associated with a particular benchmark such as the S&P 500. Hedge funds’ beta is ...

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