Efficient fund of hedge funds construction under downside risk measures
نویسندگان
چکیده
We consider portfolio allocation in which the underlying investment instruments are hedge funds. We consider a family of utility functions involving the probability of outperforming a benchmark and expected regret relative to another benchmark. Non-normal return vectors with prescribed marginal distributions and correlation structure are modeled and simulated using the normal-to-anything method. A Monte Carlo procedure is used to obtain, and establish the quality of, a solution to the associated portfolio optimization model. Computational results are presented on a problem in which we construct a fund of 13 CSFB/Tremont hedgefund indices. 2005 Elsevier B.V. All rights reserved. JEL classification: C15; C61; G11
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