Hedge Funds of Funds: A Guide for Investors

13

Structured Products, Portable Alpha and Liability Driven Investment

13.1 OVERVIEW OF PART IV

In this, the final part of the book, I address some of the more complex aspects of hedge funds of funds. In Chapter 13 we will take a look at structures that use hedge fund of funds to generate some kind of modified return stream, be it through a structure built around the hedge fund of funds or the addition of other external return streams. In Chapter 14 we will take a look at ways of getting hedge fund of funds style returns without actually investing in one, through hedge fund indices or through simulating such returns. In Chapter 15 we will take a brief look at the academic progress in the field which may benefit the investor in the future. Finally, in Chapter 16, we will take a look at the evolution of hedge fund of funds and also take a look at what investors can expect looking forward,

13.2 CHAPTER OVERVIEW

In Chapter 13 I introduce the different available methods that exist to modify the return stream of hedge funds of funds to create a solution to satisfy a specific demand. This could be through building a structured product out of a hedge fund of funds to provide a guarantee against loss, give potentially leveraged returns or modify returns to pay out in a specific way. Another potential modification would be to create what is known as a portable alpha solution. Here, the hedge fund of funds returns (the alpha) are added to the return stream of another asset class such as equities ...