Portfolio allocation with hedge funds: Case study of a Swiss institutional investor

Laurent Favre and José-Antonio Galeano
Additional contact information
Laurent Favre: UBS, Postal: Switzerland, http://www.ubs.com/
José-Antonio Galeano: Banque Cantonale Vaudoise, Postal: Switzerland, http://www.bcv.ch/fr

Journal of Financial Transformation, 2002, vol. 4, 57-63

Abstract: Asset allocation advisers usually use the mean-variance framework to show the benefits of investing in hedge funds. The authors prove that this is not optimal when the assets are not normally distributed and develop a method based on a modified Value-at-Risk for non-normally distributed assets. We take the example of a Swiss pension fund investing part of its wealth in hedge funds and show that computing a portfolio with mean and variance considerably underestimates the risk of the portfolio.

Keywords: Portfolio management; asset allocation; hedge funds; value-at-risk; Swiss pension funds (search for similar items in EconPapers)
JEL-codes: G11 G23 (search for similar items in EconPapers)
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1284

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