The impact of hedge fund indices on portfolio performance

Maria Teresa Garcia () and Gonçalo Liberal

No 2019/85, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: The purpose of this paper is to assessthecombination of investable hedge funds indices with a traditional portfolio of 60% stocks and40% bonds.The S&P 500 Index,the Barclays US Aggregate Bond Index, and threeinvestable hedge fund indices,the MEBI Maximum Sharpe Ratio L1Index, the MEBI Zero Beta Strategy L1Index, and the Eurekahedge ILS Advisers Index, were considered to conduct performance comparison, using time windows of two, five and ten years, from the 1st of January,2006,to the 1st 2of February, 2016. Significant reduction of the beta of the overall portfolio is reached. The findings showed that the investable hedge fund indices under analysis can be used as an easy way to protect a portfolio during different market conditions, diversifying the risks of the traditional investment portfolios.The paper provides evidence of how investable hedge fund indices lead to an improvement in the performance results,when compared with the traditional global equity-bond portfolio alone.

Keywords: Markowitz portfolio theory; optimal portfolios; investable hedge fund index; performance evaluation (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-fmk and nep-rmg
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