This thesis examines the degree to which alternative funds deviate from their style-benchmark and how this is related to past performance and fund size, and how it impacts future risk and returns. Additionally the thesis examines how security selection and market timing skills differ across varying degrees of deviation from the benchmark. The thesis uses data for hedge funds, funds of funds, and CTA funds from the Center for International Securities and Derivatives Markets and employs fund???s tracking error relative to their style-benchmark to estimate the level of drift. The style-benchmarks used are the median return for all reporting funds that follow a particular style and funds are assigned a benchmark based on their self-reported style. First, this thesis documents statistically significant differences in the tracking errors of portfolios of funds with the highest tracking error versus funds with the lowest tracking error, implying that some managers drift from their self-reported style-benchmarks. Second, funds??? benchmark-inconsistency is less severe in the case of funds that have a regulatory obligation to disclose their performance, suggesting that the absence of regulation fosters an environment where managers can be more flexible with their investment approach. Third, the tendency to drift from the benchmark is most prevalent amongst funds with superior past performance as well as small funds. Fourth, future total portfolio risk increases as funds display more benchmarkinconsistency, suggesting that managers adopt riskier strategies as they attempt to enhance returns. Fifth, the thesis demonstrates that CTA funds that display drift from their benchmark produce higher absolute and relative returns in subsequent periods regardless of the direction of the general market. In contrast, the findings show for hedge funds and funds of funds, benchmark-inconsistent funds are likely to outperform in bull markets and underperform in bear markets. Finally, this thesis shows that more benchmark-consistent managers have better security selection skill. The main contribution of this thesis is in identifying the group of hedge funds, funds of funds, and CTA funds that are likely to deviate from their self-reported style-benchmark and the risk-return consequences of such deviations. The findings have implications for investors and regulators.

<p>Reading the daily financial news, it becomes quite obvious that hedge funds are receiving huge attention by financial analysts and politicians. Many people fear the influence of hedge funds on single companies as well as on the global economy.</p><p>This study does not judge the behavior of hedge funds. Instead, it focuses on the nature of hedge funds and their mystique image. Especially the common view of their market neutral performance is of interest, which is theoretically achieved through the use of derivatives and short positions. In this thesis the feature of market neutrality is investigated in depth, since it can improve the overall performance of investors’ portfolios in bull as well as in bear markets through diversification effects.</p><p>Therefore the hedge funds and their environment, the capital markets, are examined from an academically point of view by emphasizing on the following research questions:</p><p>1. Are hedge funds performing market neutral in bull and bear markets?</p><p>2. To what extent should they be included in optimal risky portfolios according to Modern Portfolio Theory and advanced performance measurement tools, considering their degree of market neutrality?</p><p>This study is based on extensive knowledge of financial and econometric theories. Capital market theories, modern portfolio theory, hedge fund data and econometric knowledge about time series analysis build the basis for further investigations and are necessary to understand the characteristics of hedge funds and hedge fund data.</p><p>In order to be able to deal with the shortcomings of hedge fund data, an analytical framework for the preparation of data is created that enables the authors to start with the analysis of these questions. The framework is applicable to all kinds of hedge funds presented in this thesis and enables the reader to test further hedge fund classes by himself.</p><p>In a quantitative study the created framework is applied to 2160 hedge funds of Barclays Hedge Fund Database, which builds the basis for analyzing market neutrality. Further input for the portfolio optimization consists of 19 hedge fund indices, which were provided by the Greenwich Alternative Investment Hedge Fund Database and 4 benchmark indices for the stock and bond market.</p><p>The analysis consists of two different parts. For the first research question various correlation and return matrices are constructed, which shall provide information about market neutrality of hedge funds. A correlation matrix also serves as important input for the portfolio analysis and therefore builds the basis for the analysis of the second research question. This shall provide some fundamental recommendations about the weighting of diverse hedge fund classes in optimal risky portfolios.</p><p>The conducted analysis demonstrated clearly the following findings:</p><p>1. Market neutrality has to be rejected for most hedge fund strategies. It is only attainable through strategies, which focus more on arbitrage and/or the bond market and therefore seems to be more a by-product than an actually provoked feature.</p><p>2. Only two strategies, equity short and convertible arbitrage, managed to beat the benchmark and to improve the overall performance of the portfolio when taking the specific return distribution of hedge funds into account.</p>

<p>Background: We have reason to believe that in fear of doing wrong; most PPM investors are crippled to stay passive. Hence, they are not using the full potential of the PPM systems. Some are lured in to use professional pension saving steward by promises of abnormal return. According to efficient market hypothesis this would be impossible, however, studies have shown that their might exist inherent financial anomalies that by the utilization of historic information can open the window for abnormal return.</p><p>Purpose: The purpose of the study is to draw attention to the problem of using ex ante data to predict ex post returns. Thus, we would have evaluated the practical implication of using ex ante data as a determinant in relation to optimal PPM funds selection, and if possible to provide some simplistic guidelines for the average PPM investor.</p><p>Results: We found a handful of portfolios that gave significant results against their own index; however, when tested against Sverige, rena and Global, Mix bolag the evidence of abnormal return were thin.  From our results, we conclude that their seems to be a persistence effect, as top achievers continued to perform above average in almost all cases, however, one could not profitize on abnormal return other than by chance.  Consequently, historic return can give the investor an aid in optimal portfolio selection. Historic figures concerning standard deviation, expense ratios, and load fees all significantly correlated with return, however, neither seem to give the investor an edge in optimal PPM portfolio selection.</p>

<p>Syftet med uppsatsen är att ta reda på vilka faktorer som ligger till grund för bankers riskklassificering av fonder. För att få svar på frågan sökte vi kontakt med de fyra storbankerna, varav tre kunde ställa upp på intervju (Handelsbanken, Nordea och Swedbank). Dessa banker intervjuades via telefon då detta var den bästa metoden enligt vår synvinkel. För att få mer klarhet i ämnet har svaren från intervjupersonerna kompletterats med publicerat material på respektive banks hemsida.</p><p>Det som framkom efter insamlingen av allt material från bankerna var att samtliga banker använder sig av skalor för att presentera risk på fonder. Skalformatet samt färgsättning varierar dock mellan bankerna. Faktorer som avgör i vilken riskklass en fond hamnar i är fondens investeringsinriktning, t.ex. om det är en aktiefond eller en räntefond. Aktiefonder har generellt högre risk än räntefonder och har därmed en högre standardavvikelse. Standardavvikelsen är den faktor som mest ligger till grund för fonders riskklassificering vilket samtliga banker betonade. Det är ett riskmått som innebär att ju högre standardavvikelsen är desto högre är risken. Standardavvikelsen grundar sig på historisk avkastningsdata som varierar mellan bankerna, men det vanliga är att standardavvikelsen grundas på 1, 3 eller 5 år bakåt i tiden. Det som avgör är hur lång tid fonden har funnits. Utöver standardavvikelsen så finns det andra parametrar som bankerna använder sig av vid riskklassificering. Handelsbanken använder sig exempelvis av value at riskmetoder och stresstester. Även Nordea använder sig av value at riskmetoder i vissa fall. I Swedbanks fall kan metoden inte vara särskilt central då metoden inte har nämnts. De övriga faktorer som påverkar i vilken riskklass en specifik fond hamnar är olika risker, där marknadsrisken är den risk som påverkar mest enligt respondenterna. Andra risker påverkar också i olika grad, men den största tonvikten ligger på marknadsrisken. De olika måtten som exempelvis sharpekvot, informationskvot och aktiv risk, ligger inte till grund för fonders riskklassificering.</p><p> </p>

<p>Utifrån en historisk jämförelse av de tre äldsta svenska ETFerna undersöker vi huruvida svensknoterade ETFer är en bättre placeringsstrategi än aktivt förvaltade Sverigefonder. Studien genomförs med de fyra utvärderingsmåtten Sharpe Ratio, Treynor Ratio, Jensen’s alfa samt Information Ratio för att se om ETFer ger högre riskjusterad avkastning än jämförbara aktivt förvaltade Sverigefonder. De tre ETFerna, XACT OMXS30, XACT OMXSB och XACT OMXSBULL jämförs mot samtliga aktivt förvaltade Sverigefonder som har som strategi att investera i stora bolag listade på Stockholmsbörsen. Samtliga utvärderingsmått ger tvetydiga resultat men två av de undersökta ETFerna visar sig ha genererat högre riskjusterad överavkastning än de jämförda fonderna. ETFernas överavkastning kan inte statistiskt säkerställas och bör därför tolkas med försiktighet. Vår undersökning indikerar dock att det kan vara mer fördelaktigt för privata investerare som värdesätter hög likviditet och aktierelaterade egenskaper att investera i ETFer framför aktivt förvaltade fonder.</p>

Thesis (Ph. D.)--University of Texas at Austin, 2006. / Vita. Includes bibliographical references.

Syftet med uppsatsen är att ta reda på vilka faktorer som ligger till grund för bankers riskklassificering av fonder. För att få svar på frågan sökte vi kontakt med de fyra storbankerna, varav tre kunde ställa upp på intervju (Handelsbanken, Nordea och Swedbank). Dessa banker intervjuades via telefon då detta var den bästa metoden enligt vår synvinkel. För att få mer klarhet i ämnet har svaren från intervjupersonerna kompletterats med publicerat material på respektive banks hemsida. Det som framkom efter insamlingen av allt material från bankerna var att samtliga banker använder sig av skalor för att presentera risk på fonder. Skalformatet samt färgsättning varierar dock mellan bankerna. Faktorer som avgör i vilken riskklass en fond hamnar i är fondens investeringsinriktning, t.ex. om det är en aktiefond eller en räntefond. Aktiefonder har generellt högre risk än räntefonder och har därmed en högre standardavvikelse. Standardavvikelsen är den faktor som mest ligger till grund för fonders riskklassificering vilket samtliga banker betonade. Det är ett riskmått som innebär att ju högre standardavvikelsen är desto högre är risken. Standardavvikelsen grundar sig på historisk avkastningsdata som varierar mellan bankerna, men det vanliga är att standardavvikelsen grundas på 1, 3 eller 5 år bakåt i tiden. Det som avgör är hur lång tid fonden har funnits. Utöver standardavvikelsen så finns det andra parametrar som bankerna använder sig av vid riskklassificering. Handelsbanken använder sig exempelvis av value at riskmetoder och stresstester. Även Nordea använder sig av value at riskmetoder i vissa fall. I Swedbanks fall kan metoden inte vara särskilt central då metoden inte har nämnts. De övriga faktorer som påverkar i vilken riskklass en specifik fond hamnar är olika risker, där marknadsrisken är den risk som påverkar mest enligt respondenterna. Andra risker påverkar också i olika grad, men den största tonvikten ligger på marknadsrisken. De olika måtten som exempelvis sharpekvot, informationskvot och aktiv risk, ligger inte till grund för fonders riskklassificering.

Reading the daily financial news, it becomes quite obvious that hedge funds are receiving huge attention by financial analysts and politicians. Many people fear the influence of hedge funds on single companies as well as on the global economy. This study does not judge the behavior of hedge funds. Instead, it focuses on the nature of hedge funds and their mystique image. Especially the common view of their market neutral performance is of interest, which is theoretically achieved through the use of derivatives and short positions. In this thesis the feature of market neutrality is investigated in depth, since it can improve the overall performance of investors’ portfolios in bull as well as in bear markets through diversification effects. Therefore the hedge funds and their environment, the capital markets, are examined from an academically point of view by emphasizing on the following research questions: 1. Are hedge funds performing market neutral in bull and bear markets? 2. To what extent should they be included in optimal risky portfolios according to Modern Portfolio Theory and advanced performance measurement tools, considering their degree of market neutrality? This study is based on extensive knowledge of financial and econometric theories. Capital market theories, modern portfolio theory, hedge fund data and econometric knowledge about time series analysis build the basis for further investigations and are necessary to understand the characteristics of hedge funds and hedge fund data. In order to be able to deal with the shortcomings of hedge fund data, an analytical framework for the preparation of data is created that enables the authors to start with the analysis of these questions. The framework is applicable to all kinds of hedge funds presented in this thesis and enables the reader to test further hedge fund classes by himself. In a quantitative study the created framework is applied to 2160 hedge funds of Barclays Hedge Fund Database, which builds the basis for analyzing market neutrality. Further input for the portfolio optimization consists of 19 hedge fund indices, which were provided by the Greenwich Alternative Investment Hedge Fund Database and 4 benchmark indices for the stock and bond market. The analysis consists of two different parts. For the first research question various correlation and return matrices are constructed, which shall provide information about market neutrality of hedge funds. A correlation matrix also serves as important input for the portfolio analysis and therefore builds the basis for the analysis of the second research question. This shall provide some fundamental recommendations about the weighting of diverse hedge fund classes in optimal risky portfolios. The conducted analysis demonstrated clearly the following findings: 1. Market neutrality has to be rejected for most hedge fund strategies. It is only attainable through strategies, which focus more on arbitrage and/or the bond market and therefore seems to be more a by-product than an actually provoked feature. 2. Only two strategies, equity short and convertible arbitrage, managed to beat the benchmark and to improve the overall performance of the portfolio when taking the specific return distribution of hedge funds into account.

Background: We have reason to believe that in fear of doing wrong; most PPM investors are crippled to stay passive. Hence, they are not using the full potential of the PPM systems. Some are lured in to use professional pension saving steward by promises of abnormal return. According to efficient market hypothesis this would be impossible, however, studies have shown that their might exist inherent financial anomalies that by the utilization of historic information can open the window for abnormal return. Purpose: The purpose of the study is to draw attention to the problem of using ex ante data to predict ex post returns. Thus, we would have evaluated the practical implication of using ex ante data as a determinant in relation to optimal PPM funds selection, and if possible to provide some simplistic guidelines for the average PPM investor. Results: We found a handful of portfolios that gave significant results against their own index; however, when tested against Sverige, rena and Global, Mix bolag the evidence of abnormal return were thin.  From our results, we conclude that their seems to be a persistence effect, as top achievers continued to perform above average in almost all cases, however, one could not profitize on abnormal return other than by chance.  Consequently, historic return can give the investor an aid in optimal portfolio selection. Historic figures concerning standard deviation, expense ratios, and load fees all significantly correlated with return, however, neither seem to give the investor an edge in optimal PPM portfolio selection.

Background: For an investor inflation has always caused problems since it eatsaway portfolio returns, reducing the purchasing power. Russia hasbeen fighting high inflation for the last two decades primarily due tothe economic restructuring from central planning to a free marketeconomy, raising the price levels. Historically property has been regardedas a good hedge against inflation and multiple research studiessupport this assumption. The Russian market for real estate hasgrown significantly over the last decade and is very interesting froma investor perspective. Purpose: The purpose of this thesis is to determine whether Russian Real Estate Funds are an effective investment tool in a portfolio to hedgeagainst inflation. Method: To fulfill our purpose for this study a quantitative method with adeductive approach is used. The methodology constitutes as theframe for the thesis. In order to analyze the secondary data, We willmake use of statistical models proven from past research/literaturewithin in the field. Conclusion: The empirical findings of this study show that during the time period investigated, there exist no evidence that a portfolio holdingRussian real estate funds could act as an appropriate hedge againstinflation. We believe the results could be explained by the limitationin the Russian market when gathering data due to transparencyproblems. There are also relativity few empirical studies within thefield of study in markets with a high inflation rate. Finally We believethe study could enhance an investor’s choice in markets withsimilar conditions.