January 2013
Beginner
350 pages
10h 25m
English
book
Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance
by Kevin R. Mirabile
Content preview from Hedge Fund Investing: A Practical Approach to Understanding Investor Motivation, Manager Profits, and Fund Performance
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.
Discussion Questions and Problems
1. What are some of the concerns or qualitative issues that serve to restrict the optimal allocation of capital to hedge funds?
2. Assume a HNWI who is invested 50-50 in stocks and bonds wants to allocate 30 percent of his current portfolio to hedge funds. His advisor suggests reallocating a portion of his equity investments to meet this objective. Assume the historical performance for stocks are 10 percent, bonds are 6 percent, and hedge funds are 10 percent.
a. What is the original expected return of the portfolio?
b. What is the new expected return of the portfolio?
3. Assume the returns in the previous question; that the volatility of stocks is 15 percent, of bonds is 8 percent, and of hedge funds is 7 percent; and that the correlation between stocks and bonds is .1, between stocks and hedge funds is .4, and between bonds and hedge funds is negative 0.1.
a. What is the optimal percentage weight allocated to each category to minimize risk?
b. What is the expected return from this portfolio?
c. What is the expected standard deviation of this portfolio?
d. What is the new Sharpe ratio of this portfolio?
4. Why did the ratio of risk to reward change in the previous question, and was the change beneficial to the portfolio?
5. Now assume that there is a maximum allocation to hedge funds of 25 percent. How does that change the optimal weights, expected return, and standard deviation?
6. What would be the change in hedge fund assets ...
Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Read now
Unlock full access
More than 5,000 organizations count on O’Reilly
O’Reilly covers everything we've got, with content to help us build a world-class technology community, upgrade the capabilities and competencies of our teams, and improve overall team performance as well as their engagement.Julian F.
I wanted to learn C and C++, but it didn't click for me until I picked up an O'Reilly book. When I went on the O’Reilly platform, I was astonished to find all the books there, plus live events and sandboxes so you could play around with the technology.Addison B.
I’ve been on the O’Reilly platform for more than eight years. I use a couple of learning platforms, but I'm on O'Reilly more than anybody else. When you're there, you start learning. I'm never disappointed.Amir M.
I'm always learning. So when I got on to O'Reilly, I was like a kid in a candy store. There are playlists. There are answers. There's on-demand training. It's worth its weight in gold, in terms of what it allows me to do.