Performance measurement is an integral part of investment analysis and risk management. Investment performance comprises two primary elements, namely; risk and return. The measurement of return is more straightforward compared with the measurement of risk: the latter is stochastic and thus requires more complex computation. Risk and return should, however, not be considered in isolation by investors as these elements are interlinked according to modern portfolio theory (MPT). The assembly of risk and return into a risk-adjusted number is an essential responsibility of performance measurement as it is meaningless to compare funds with dissimilar expected returns and risks by focusing solely on total return values. Since the advent of MPT performance evaluation has been conducted within the risk-return or mean-variance framework. Traditional, liner performance measures, such as the Sharpe ratio, do, however, have their drawbacks despite their widespread use and copious interpretations. The first problem explores the characterisation of hedge fund returns which lead to standard methods of assessing the risks and rewards of these funds being misleading and inappropriate. Volatility measures such as the Sharpe ratio, which are based on mean-variance theory, are generally unsuitable for dealing with asymmetric return distributions. The distribution of hedge fund returns deviates significantly from normality consequentially rendering volatility measures ill-suited for hedge fund returns due to not incorporating higher order moments of the returns distribution. Investors, nevertheless, rely on traditional performance measures to evaluate the risk-adjusted performance of (these) investments. Also, these traditional risk-adjusted performance measures were developed specifically for traditional investments (i.e. non-dynamic and or linear investments). Hedge funds also embrace a variety of strategies, styles and securities, all of which emphasises the necessity for risk management measures and techniques designed specifically for these dynamic funds. The second problem recognises that traditional risk-adjusted performance measures are not complete as they do not implicitly include or measure all components of risk. These traditional performance measures can therefore be considered one dimensional as each measure includes only a particular component or type of risk and leaves other risk components or dimensions untouched. Dynamic, sophisticated investments – such as those pursued by hedge funds – are often characterised by multi-risk dimensionality. The different risk types to which hedge funds are exposed substantiates the fact that volatility does not capture all inherent hedge fund risk factors. Also, no single existing measure captures the entire spectrum of risks. Therefore, traditional risk measurement methods must be modified, or performance measures that consider the components (factors) of risk left untouched (unconsidered) by the traditional performance measures should be considered alongside traditional performance appraisal measures. Moreover, the 2007-9 global financial crisis also set off an essential debate of whether risks are being measured appropriately and, in-turn, the re-evaluation of risk analysis methods and techniques. The need to continuously augment existing and devise new techniques to measure financial risk are paramount given the continuous development and ever-increasing sophistication of financial markets and the hedge fund industry. This thesis explores the named problems facing modern financial risk management in a hedge fund portfolio context through three objectives. The aim of this thesis is to critically evaluate whether the novel performance measures included provide investors with additional information, to traditional performance measures, when making hedge fund investment decisions. The Sharpe ratio is taken as the primary representative of traditional performance measures given its widespread use and also for being the hedge fund industry’s performance metric of choice. The objectives have been accomplished through the modification, altered use or alternative application of existing risk assessment techniques and through the development of new techniques, when traditional or older techniques proved to be inadequate. / PhD (Risk Management), North-West University, Potchefstroom Campus, 2014

Thesis (MBA)--Stellenbosch University, 2002. / ENGLISH ABSTRACT: Every investor that invests in JSE Securities Exchange listed shares wants to achieve optimum profits. Numerous tools are used to help investors and analysts to analyse buy signals, standard deviations, risk-adjusted returns and every possible piece of information that may lead to perfect recommendations. Despite all the problems and issues involved to make perfect recommendations, it seems as if some individuals achieve well above average results. There are no obvious reasons for the success they achieve. Often it may be ascribed to a combination of detailed technical analysis, market intelligence as well as gut-feel. This study evaluates the recommendations made by the analysts and quantifies the accuracy. Different scoring systems are used to evaluate the accuracy of the recommendations and a ranking of the analysts is compiled. Risk-adjusted returns are investigated in detail and are used in the calculations. The results of this study show that some analysts outperformed the rest by substantial margins. / AFRIKAANSE OPSOMMING: Elke belegger wat in aandele op die JSE Sekuriteitebeurs belê, wil die maksimum moontlike wins maak. Verskeie modelle word gebruik om beleggers te help om koopseine, standaardafwykings, risiko-aangepaste winste en enige andere moontlike inligting te ontleed om sodoende betroubare aanbevelings te maak. Ten spyte van al die probleme wat dit moeilik maak om akkurate vooruitskatlings te maak, wil dit voorkom asof sekere individue heelwat beter vaar as die gemiddeld. Die sukses kan nie aan ooglopende aspekte toegeskryf word nie en dit berus meestal by 'n kombinasie van gedetaileerde tegniese analise, markintelligensie en "gut-feel". Hierdie studie is daarop toegespits om vooruitskattings van analiste te evalueer en die akkuraatheid van die aanbevelings te kwantifiseer. Verskeie punte stelsels word gebruik om die akkuraatheid van die aanbevelings te evalueer en 'n ranglys word opgestel na aanleiding van die resullate. Risiko aangepaste resultate word in detail ondersoek en word gebruik in die berekeninge. Die resultate van die navorsing dui daarop dat sekere ontleders aansienlik beter vaar as ander.

We describe Employees Provident Funds (EPF) Malaysia. We explain about Defined Contribution and Defined Benefit Pension Funds and examine their similarities and differences. We also briefly discuss and compare EPF schemes in four Commonwealth countries. A family of Stochastic Programming Models is developed for the Employees Provident Fund Malaysia. This is a family of ex-ante decision models whose main aim is to manage, that is, balance assets and liabilities. The decision models comprise Expected Value Linear Programming, Two Stage Stochastic Programming with recourse, Chance Constrained Programming and Integrated Chance Constraints Programming. For the last three decision models we use scenario generators which capture the uncertainties of asset returns, salary contributions and lump sum liabilities payments. These scenario generation models for Assets and liabilities were developed and calibrated using historical data. The resulting decisions are evaluated with in-sample analysis using typical risk adjusted performance measures. Out- of- sample testing is also carried out with a larger set of generated scenarios. The benefits of two stage stochastic programming over deterministic approaches on asset allocation as well as the amount of borrowing needed for each pre-specified growth dividend are demonstrated. The contributions of this thesis are i) an insightful overview of EPF ii) construction of scenarios for assets returns and liabilities with different values of growth dividend, that combine the Markov population model with the salary growth model and retirement payments iii) construction and analysis of generic ex-ante decision models taking into consideration uncertain asset returns and uncertain liabilities iv) testing and performance evaluation of these decisions in an ex-post setting.

The interest for sustainable funds have increased recently. ESG has become a part of companies everyday life and SRI a part of the investment strategies used by equity funds. In lack of research in the field of mutual equity funds, we choose to investigate how investment strategies in “social responsible investment” (SRI) affect the risk-adjusted return. The study investigated 51 equity funds between 2014 and 2019 that had been reporting their sustainability strategies in the so called “hållbarhetsprofilen”. From this information portfolios were constructed based on the funds strategic work in comparison to conventional funds counterparts. Carhart fourfactor model were used to calculate the risk-adjusted return, the sharpe ratio to determine return in relation to the another measure of risk and the strandarddevation to calculate the total risk in each portfolio. The study concluded that all swedish equity funds worked with combinations of several SRI strategies to implement sustainable investment. In line with previous research our results show that funds managed with a strategy of low rate exclusion show a higher risk-adjusted return compared to strategys with higher exclusion rates. The conclusion though, after statistical testing was that the results could not be proven significant between the two groups of SRI-funds, meaning that we could not prove any difference in risk-adjusted returns between the groups. Further the results showed that the total risk-exposure between SRI and conventional equity funds, due to reduced diversification was not higher in SRI funds in comparison with their conventional peers. Nor did we find any evidence for ESG-integration to dampen total risk during the time for investigation. / Intresset för hållbara fonder har ökat på senare tid. ESG har blivit en del av bolagens vardag och SRI en del av förvaltarnas strategier. Då det saknas forskning inom området på aktiefonder har vi valt att undersöka hur investeringsstrategier inom “Socially Responsible Investment” (SRI) påverkar den riskjusterade avkastningen. Studien undersökte 51 stycken aktiefonder mellan 2014 och 2019 som hade rapporterat sina hållbarhetsstrategier via den så kallade hållbarhetsprofilen. Från denna information skapades portföljer beroende på fondernas strategiska arbete som sedan jämfördes med konventionella fonder som motsvarigheter. Carhart fyrfaktormodell användes för att beräkna den riskjusterade avkastningen, sharpekvoten för att utröna avkastning i förhållande till risken och standardavvikelsen för att beräkna den totala risken i portföljen. Slutsatserna av undersökningen blev att samtliga aktiefonder arbetar med kombinationer av flera hållbarhetsstrategier för att genomföra hållbara investeringar. I linje med tidigare forskning visade resultaten även att exkludering i låg grad uppvisar en högre riskjusterad avkastning jämfört med en högre exkluderingsgrad. Detta resultatet var dock efter statistiskt test inte signifikant, vilket i sin tur genererade slutsatsen att den riskjusterade avkastningen inte påverkades av i vilken grad fonden använde sig av negativ screening. Den totala risken påverkades varken av att SRI-fonderna i jämförelse med de konventionella fonderna haft sämre möjligheter till diversifiering eller att SRI-fondernas på grund av ESG-integrering kunnat minska risken.

Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2014. / The use of a Covered Call strategy has long been favoured by investors the world over for its potential to enhance yield in a long-only equity portfolio. There already exists a wealth of research examining the risk and return features and theories of this strategy. This paper aims to contribute to this debate by conducting research that is specific to the South African equity market and considered from the perspective of a retail investor, particularly by tracking the negative friction induced by transaction costs. It also seeks to answer the question of which Covered Call strategies provide the best risk-adjusted returns by pricing various expiry range and moneyness combinations over differing market trend phases during a 13-year period of trade on the JSE.

<p>The purpose of the thesis has been to explore the use of hedge fund styles when constructing portfolios of hedge funds (i.e. funds of hedge funds). The central question is if the use of hedge fund styles can significantly explain and improve risk adjusted returns (characterized by Sharpe ratios). The study has been done in collaboration with Optimized Portfolio Management AB who desire further knowledge and evaluation of hedge fund styles for their fund of hedge funds.</p><p>To be able to create successful ex ante portfolios we have explored various prediction models for both risk and return. Our findings indicate that return prediction is problematic using simple models such as regression since the risk exposure of the indices appear to change significantly over time. One can however using exponentially weighted moving averages (EWMA) achieve relatively promising estimations of future returns. </p><p>Covariance matrix estimation seems to be more straightforward. We have achieved promising results using both traditional EWMA models as well as improved estimators using principal component analysis.Covariance prediction models were evaluated separately using a minimum-variance portfolio optimization technique and provided a significant risk reduction compared to the aggregated hedge fund universe (represented by a naively diversified portfolio). Combinations of risk and return prediction models were evaluated using traditional mean-variance portfolio construction methods, which were optimized for Sharpe ratios. These provided a significant increase in risk adjusted returns relative to the aggregated hedge fund universe. The allocation is however discouraging due to serious instability over time.</p><p>Our findings indicate that there indeed is an advantage of taking hedge fund styles into consideration when constructing funds of hedge funds in a risk adjusted perspective. However, further research into return prediction needs to be done in order to stabilize portfolio allocation. An alternative seems to be tactical style allocation on a more fundamental analysis basis.</p>

The purpose of the thesis has been to explore the use of hedge fund styles when constructing portfolios of hedge funds (i.e. funds of hedge funds). The central question is if the use of hedge fund styles can significantly explain and improve risk adjusted returns (characterized by Sharpe ratios). The study has been done in collaboration with Optimized Portfolio Management AB who desire further knowledge and evaluation of hedge fund styles for their fund of hedge funds. To be able to create successful ex ante portfolios we have explored various prediction models for both risk and return. Our findings indicate that return prediction is problematic using simple models such as regression since the risk exposure of the indices appear to change significantly over time. One can however using exponentially weighted moving averages (EWMA) achieve relatively promising estimations of future returns. Covariance matrix estimation seems to be more straightforward. We have achieved promising results using both traditional EWMA models as well as improved estimators using principal component analysis.Covariance prediction models were evaluated separately using a minimum-variance portfolio optimization technique and provided a significant risk reduction compared to the aggregated hedge fund universe (represented by a naively diversified portfolio). Combinations of risk and return prediction models were evaluated using traditional mean-variance portfolio construction methods, which were optimized for Sharpe ratios. These provided a significant increase in risk adjusted returns relative to the aggregated hedge fund universe. The allocation is however discouraging due to serious instability over time. Our findings indicate that there indeed is an advantage of taking hedge fund styles into consideration when constructing funds of hedge funds in a risk adjusted perspective. However, further research into return prediction needs to be done in order to stabilize portfolio allocation. An alternative seems to be tactical style allocation on a more fundamental analysis basis.

Morningstar is an independent provider of investment research and provide information on approximately 380 000 investment offerings about mutual funds. Morningstar are most known for their “star” rating system, which rates funds from the lowest 1-star to the highest 5-stars. Since investors frequently use fund data provided by Morningstar, we will evaluate whether investing in funds with higher fees and higher ratings would end up with higher returns. Examinations will be made if there is a relationship between mutual fund performance and the management fees within top-rated (5-star) funds and bottom-rated (1-&amp;2-star). The mutual funds which are included in this thesis are United Kingdom (UK) managed and invested in three different markets; Asia-Pacific except-Japan, Europe except UK-Large Cap, and the United States (US) Market. This allows us to compare different markets at different stages of maturity. The results clearly show that the top-rated funds within all three markets outperformed the bottom-rated funds. Furthermore, the results demonstrate that the investor in general will earn a higher return by paying a higher management fee (TER) for the top-rated funds in all regions. The results also show that the TER for the bottom-rated funds in Europe and US market is higher compared to the top-rated funds. This means that the investor will pay higher fees for funds that do not perform well.

Purpose: The purpose of this study is to examine the difference in return between Swedish and Russian hedge funds while considering the risk taken. Method: This study is based on quantitative data on funds' historical returns from the electronic database Morningstar.se. Additional data is taken from the funds websites, the Swedish National Bank and Fondbolagens förening. Result and conclusion: All hedge funds, both the Russian and Swedish performed better thanthe index. The Russian hedge funds nevertheless performed better than their Swedishcounterparts in all three evaluation methods. / Syfte: Syfte med undersökningen är att granska skillnaderna i avkastning med hänsyn till riskenmellan svenska och ryska hedgefonder. Metod: Denna studie grundas på kvantitativ data om fondernas historiska avkastning från den elektroniska databasen Morningstar.se. Ytterligare data är hämtad från fondernas hemsidor, Riksbanken och Fondbolagens förening. Resultat och slutsats: Alla hedgefonder både de ryska och de svenska presterade bättre än index. De ryska hedgefonderna presterade dock bättre än de svenska i alla tre utvärderingsmåtten.

The aim of this study is to evaluate the difference in performance and management fees between ethical and conventional mutual funds registered in Sweden. Our dataset consists of 49 ethical and 254 conventional funds, estimated on a 10-year period of time between January 2005 to January 2015. Jensen’s alpha is used as a measure for risk-adjusted performance and estimated through CAPM single-index model as well as by Carhart’s four-factor model. By adding back the management fees to the net returns and then estimate Jensen’s alpha by Carhart’s four-factor model once again, evidence of any differences in the impact on return between ethical and conventional funds is found. The results obtained from the study show that there is no difference in neither the risk-adjusted returns nor management fees between ethical and conventional funds. It is concluded that Swedish mutual fund investors are not paying a specific price in terms of reduced returns or higher management fees for putting social and ethical values into their financial investment decision.