Hedge Fund News From HedgeCo.Net


Stop Fiddling With Your Hedge Fund Strategy Allocation

aiCIO – “Don’t just do something, sit there” may be precisely the advice that hedge fund investors need to hear, according to an article published by the CFA Institute.

Hedge fund investors should actively rebalance their portfolio within certain bounds and avoid focusing on categories that outperform, contends the article, authored by Ted Seides, CFA. By doing so, investors can gain a leg up over their “performance-chasing” competitors.

“Although the determination of a policy portfolio for hedge funds is an imprecise art, active rebalancing is a useful science that adds value and keeps behavioral biases in check,” advises Seides. “In absence of active rebalancing, allocations to hedge fund strategies inevitably drift away from espoused targets.” Consequently, investors should maintain clearly demarcated policy targets and not allow their portfolio to veer outside them.

Seides cautions that while anecdotal evidence supports so-called “momentum investing,” a shrewd investor can outperform peers by resisting the urge to invest in last year’s winners. “The odds are that one of last year’s underperformers, such as long–short equity, will take this year’s prize,” he explains. “Next year, we might look back through the rearview mirror and wonder if today’s case for global macro and trading strategies was little more than a behavioral bias–induced rationalization for performance-chasing behavior.”

Click here to read the full story

Related Posts Plugin for WordPress, Blogger...

About the HedgeCo News Team

The Hedge Fund News Team stays on top of breaking news in the Hedge Fund industry on an hourly basis. Signup to HedgeCo.Net to recieve Daily or Weekly news updates from our team.
This entry was posted in Hedge Fund Strategies, Syndicated and tagged . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>