Many hedge funds sell their approach as good diversification to traditional stock/bond portfolios. But if you look at the diversification benefits of hedge funds, you will find that the majority of hedge fund strategies come up wanting. In practice, they tend to have rather high correlation with stock markets. One hedge fund style that is truly uncorrelated is global macro together with its close cousin managed futures. I like global macro hedge funds, but then again, I would say that since I am a macro junkie. So, let’s take a fresh look at the evidence, or lack thereof, for their diversification benefits.
I'm assuming these figures take into account the higher management costs for macro and managed future funds? ...or the "Red Braces for Ruperts Charge" RBRC as I think of it
Thanks JK
I'm assuming these figures take into account the higher management costs for macro and managed future funds? ...or the "Red Braces for Ruperts Charge" RBRC as I think of it
Wouldn't a combination of cash, 30 year Treasuries and international equities provide a better hedge?
V good!
Ok - but index funds have an alpha of ZERO. All their returns are by beta.