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The Right Place for Alternative Betas in Hedge Fund Performance: an Answer to the Capacity Effect Fantasy
Two studies, by Watson Wyatt and UBS (both from March 2005), give a pessimistic view of the hedge fund industry's capacity to generate long-term returns, due to its increasing size.
Author(s) :
, Research Associate with the Edhec Risk and Asset ManagementResearch Centre.
Research Centre.
Presentation :
Unfortunately, these studies focus almost exclusively on alpha. In the present paper, we show the importance of considering not only the exposure to the market (the traditional beta), but also the other exposures (the alternative betas) to cover all the sources of hedge fund returns. To do so, we examine the real extent to which the variability and level of hedge fund returns are affected by (static) betas, dynamic betas (i.e., factor timing), and pure alpha (i.e., security selection).| Type : | Publication EDHEC |
|---|---|
| Date : | le 06/06/2005 |
| Extra information : | Ce document constitue une synthèse de travaux scientifiques conduits au sein de l'EDHEC. Pour plus d'informations, nous vous prions de vous adresser à Séverine Anjubault de la direction de la recherche de l'EDHEC : severine.anjubault@edhec.edu Les opinions exprimées sont celles de l'auteur et n'engagent pas la responsabilité de l'EDHEC. |
| Research Cluster : | Finance |
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Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 20 business schools. Fully international and directly connected to the business world, EDHEC is a school for business, rather than a business school, where excellence in teaching and research focuses on innovation to stimulate entrepreneurship and creativity. For business from birth and dedicated to business, EDHEC makes entrepreneurs for life, able to remodel or create successful businesses wherever they work.
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