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Multi-Strategy Hedge Funds: Equity in a Different Shade?

Investigating the allocation skills of hedge fund managers

Nicolas Rabener
10 min read
15 Mar 2021

SUMMARY

  • Investors can outsource the hedge fund selection process to multi-strategy hedge funds
  • These have outperformed broad hedge fund indices since 2005
  • However, most of the returns can be attributed to simple equity exposure

INTRODUCTION

Investing in hedge funds is challenging as both strategies and fund structures are complex. Almost all strategies are cyclical, although not all are on the same cycle. For example, statistical arbitrage tends to perform best when volatility is high, however, that represents a poor environment for long-short equity strategies with a value bias. The performance drivers are relatively clear for some strategies, but far less obvious for others like CTAs.

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