Investering i hedgefonde: Værdiskabelse og udvælgelse

Ulrik Kjersgaard Friis

Student thesis: Master thesis


Hedge Funds are divers in the way they are structured as well as in the ways they strive to produce absolute returns. The diversity of Hedge Funds makes it difficult for investors to evaluate the risk associated with Hedge Funds investment strategies as well as their operations. Successful investments in Hedge Funds is found through a thorough understanding of the investment strategies of the individual hedge funds, its risk, return characteristics and drivers. Return in hedge funds primarily derives from dynamic investment strategies, taking advantages of mispricing in the market, and entering in to speculative positions. Risks in Hedge Funds are related to the underlying assets in the hedge funds positions which are used to generate return, and the Hedge Funds ability to hedge these positions. Some Hedge Funds have investments in numerous sorts of securities, thereby having different return sources but also a diversified risk exposure. Hedge Funds are in general thinly capitalised which makes them especially vulnerable to irrational market behaviour, and/or flight to quality scenarios, which can force a Hedge Fund to dissolve its position due to illiquidity. To include Hedge Funds in a traditional portfolio can significantly improve the mean-variance of the portfolio, but in return the portfolio kurtosis will increase as Hedge Fund returns differs from other asset returns by exhibiting a high degree of kurtosis. The high kurtosis is expressed in returns being very close to the mean but in rare occasions the returns deviates significantly from the mean. Different investment strategies have different systematic risk and their returns are therefore changing in different market environments. The difference in return under different environments could make the impression that asset allocation is the preferred way of investing in Hedge Fund. However, due to the fact, that some Hedge Funds perform substantially bellow the mean, an investor will benefit more from focusing on selecting the right management and rather than choosing the right strategy under the economic environment. Hedge Funds are complex investments and substantial assets are required for creating a portfolio of Hedge Funds. Due to this complexity investments in Hedge Funds requires special skills, industry knowledge and analytical ability. All factors which makes investment in Hedge Fund for a selected few.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2009
Number of pages142