Comparing a hedge fund manager to a random version of him or herself is a great alternative to index benchmarking. I introduce my random portfolio generator, show you how it works, and provide the code.
The Markowitz Bullet underlies the best-known and most widely-used portfolio optimization approach. We provide a guided tour using a 3-asset portfolio.
We show how manager diversification improves confidence in predicting future hedge fund returns and can be used as a substitute for demanding long track records.
Hedge fund return predictability depends on having a long track record to analyze. How long is long enough? You won’t like the answer.
In this quick note on compounding vs volatility. I demonstrate how volatility of returns interferes with the compounding process leading to returns lower than the casual observer might expect. I raise the specter of how this may negatively impact portfolio optimization.