Reducing the Risk from Adding Stock Exposure

Adding other sources of diversification could significantly reduce the risk from increasing stock exposure, our research suggests.

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Is It Time to Get Back into Stocks—or Too Late?

After five years of fleeing stocks for the perceived safety of bonds, US mutual fund investors became net buyers of stock funds in January. While some see the return of the retail investor as a negative indicator for stocks, we say, “Better late than never.”

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How Much Hedge Fund Exposure Makes Sense?

Our research suggests that a well-diversified allocation to hedge funds might improve portfolio returns, but their greatest benefit is the risk reduction that comes from their low correlation to stocks. Here’s why.

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Hedge Funds: Identifying Alpha and Mitigating Risk

Hedge funds have historically generated higher returns than stocks with less volatility, but they also pose several significant risks that volatility alone doesn’t capture, our research suggests. That makes careful due diligence and diversification of managers crucial. 

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Rooting Out Biases in Hedge-Fund Data

In a recent article, I discussed the conclusions about hedge fund’s historical returns and risk we reached after rooting out biases in the data available. Here’s how we sought to eliminate those biases.

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Hedge Funds: Separating Fact from Hype

It’s easy to understand the allure of hedge funds—and the fear they inspire. After conducting rigorous research aimed at separating fact from hype, we have concluded that hedge funds historically have had an attractive risk/return profile.

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Allocating to Hedge Funds Should Be a Two-Step Process

The experience of two bear markets in the past decade reminded investors of the importance of diversification. This, coupled no doubt with some envy of the “endowment model” of the likes of Yale and Harvard universities, has caused many to increase their allocation to hedge funds. While this often makes sense, we think it’s important [...]

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Why Hedge Funds Did Poorly in 2011

Much has been said about the poor performance of hedge funds in 2011. Here’s why we don’t believe this undermines the case for hedge funds.

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