Change search
ReferencesLink to record
Permanent link

Direct link
Hedge Funds in a Traditional Portfolio: A Quantitative Case Study Made on the Swedish Hedge Fund Market
Umeå University, Faculty of Social Sciences, Umeå School of Business.
2009 (English)Independent thesis Advanced level (degree of Master (One Year)), 10 credits / 15 HE creditsStudent thesis
Abstract [en]

Hedge funds are a debated subject in today’s financial industry. During 2008, despite hedge funds absolute return target, the global hedge fund industry showed a negative performance whilst the Swedish hedge fund market performed relatively well in comparison. Many studies have been made investigating the effect on incorporating hedge funds in a traditional portfolio though none focused separately on the Swedish market. In a global perspective it is quite easy to invest in hedge fund portfolios due to the existence of investable indices. To invest on the Swedish market is a more complex matter. SIX Harcourt HFXS Index is a Swedish hedge fund index representing the Swedish hedge fund market though it is not investable. Hence it would be interesting to see if it is possible to create an investable version of SIX Harcourt HFXS. When creating an investable index, several administrative costs will arise and in order to cover these costs it would be interesting to see whether or not it possible to optimize SIX Harcourt HFXS Index in purpose of achieving a outperformance which could cover any administrative costs for setting up the investable version. Also, since the optimized version must replicate the standard SIX Harcourt HFXS Index it must maintain a certain level of correlation.

This thesis, which is based on a positivistic epistemology, is built upon a quantitative case study where SIX Harcourt HFXS Index is optimized in purpose of achieving an outperformance in terms of the risk-adjusted return. The optimization uses an adjusted mean-variance methodology and is limited to a maintained correlation above 0,9 towards the standard SIX Harcourt HFXS Index. The optimization is created through the use of an Excel application created by Harcourt Investment Consulting.

Also, based on the outperformance by Swedish hedge funds compared to global hedge funds, this study aims to show the effect of incorporating Swedish hedge funds in a traditional portfolio consisting of equities and bonds. This effect is analyzed by the use of several performance-and risk measures.

The study shows that it is possible to optimize SIX Harcourt HFXS Index and produce an outperformance of approximately 1,5% per annum with a maintained correlation above 0,9. It also shows that the effect of incorporating Swedish hedge funds to a traditional portfolio is positive in regards to both risk and return.

Place, publisher, year, edition, pages
2009. , 77 p.
Keyword [en]
Hedge funds, portfolio optimization, markowitz, mean-variance, efficient frontier, case study, skewness, kurtosis, sortino ratio, sharpe ratio, downside deviation, omega ratio
National Category
Business Administration
URN: urn:nbn:se:umu:diva-23363OAI: diva2:223585
Available from: 2009-07-02 Created: 2009-06-12 Last updated: 2009-07-02Bibliographically approved

Open Access in DiVA

fulltext(1428 kB)604 downloads
File information
File name FULLTEXT01.pdfFile size 1428 kBChecksum SHA-512
Type fulltextMimetype application/pdf

Search in DiVA

By author/editor
Sundqvist, Daniel
By organisation
Umeå School of Business
Business Administration

Search outside of DiVA

GoogleGoogle Scholar
Total: 604 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Total: 890 hits
ReferencesLink to record
Permanent link

Direct link