Allocation Methodologies and Customizing Hedge Fund Multi-Manager Multi-Strategy Products

Souza, Clifford De; Gokcan, Suleyman

doi:10.3905/jai.2004.391060

Cited by 11 publications

(2 citation statements)

References 6 publications

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“…We employ two conventional measures, specifically, the Sharpe and Treynor ratios. We also calculate three more comprehensive measures, namely the Sortino ratio (see Sortino and Price (2004)), the modified Sharpe ratio (see Gregoriou and Gueyi (2003) and Lee (2007)) and the Omega measure (see Keating and Shadwick (2002) and De Souza and Gokcan (2004)).…”

Section: Evaluating the Equity Tranchementioning

confidence: 99%

Performance analysis of a collateralized fund obligation (CFO) equity tranche

Aboul-Enein

Dionne

Papageorgiou

2020

New Facets of Economic Complexity in Modern Financial Markets

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This article examines the performance of the junior tranche of a Collateralized Fund Obligation (CFO), i.e. the residual claim (equity) on a securitized portfolio of hedge funds. We use a polynomial goal programming model to create optimal portfolios of hedge funds, conditional to investor preferences and diversification constraints (maximum allocation per strategy). For each portfolio we build CFO structures that have different levels of leverage, and analyze both the stand alone performance as well as potential diversification benefits (low systematic risk exposures) of investing in the Equity Tranche of these structures. We find that the unconstrained mean-variance portfolio yields a high performance, but greater exposure to systematic risk. We observe the exact opposite picture in the case of unconstrained optimization where a skewness bias is added, thus proving the existence of a trade-off between stand alone performance and low exposure to systematic risk factors. We provide evidence that leveraged exposure to these hedge fund portfolios through the structuring of CFOs creates value for the Equity Tranche investor.

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Section: Evaluating the Equity Tranchementioning

confidence: 99%

Performance analysis of a collateralized fund obligation (CFO) equity tranche

Aboul-Enein

Dionne

Papageorgiou

2020

New Facets of Economic Complexity in Modern Financial Markets

View full text Add to dashboard Cite

show abstract

Section: Evaluating the Equity Tranchementioning

confidence: 99%

Performance Analysis of a Collateralized Fund Obligation (CFO) Equity Tranche

2009

View full text Add to dashboard Cite

Abstract:This article examines the performance of the junior tranche of a Collateralized Fund Obligation (CFO), i.e. the residual claim (equity) on a securitized portfolio of hedge funds. We use a polynomial goal programming model to create optimal portfolios of hedge funds, conditional to investor preferences and diversification constraints (maximum allocation per strategy). For each portfolio we build CFO structures that have different levels of leverage, and analyze both the stand alone performance as well as potential diversification benefits (low systematic risk exposures) of investing in the Equity Tranche of these structures. We find that the unconstrained mean-variance portfolio yields a high performance, but greater exposure to systematic risk. We observe the exact opposite picture in the case of unconstrained optimization where a skewness bias is added, thus proving the existence of a trade-off between stand alone performance and low exposure to systematic risk factors. We provide evidence that leveraged exposure to these hedge fund portfolios through the structuring of CFOs creates value for the Equity Tranche investor.

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2012

Portable Alpha Theory and Practice

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Allocation Methodologies and Customizing Hedge Fund Multi-Manager Multi-Strategy Products

Cited by 11 publications

References 6 publications

Performance analysis of a collateralized fund obligation (CFO) equity tranche

Performance analysis of a collateralized fund obligation (CFO) equity tranche

Performance Analysis of a Collateralized Fund Obligation (CFO) Equity Tranche

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