TY - JOUR T1 - Funds of Hedge Funds Take the Wrong Risks JF - The Journal of Portfolio Management SP - 108 LP - 121 DO - 10.3905/jpm.2007.684758 VL - 33 IS - 3 AU - Stan E Beckers AU - Ross Curds AU - Simon Weinberger Y1 - 2007/04/30 UR - https://pm-research.com/content/33/3/108.abstract N2 - On average the fund of hedge funds industry over the last 15 years has delivered alpha with a high information ratio. Unfortunately, these alphas come with significant common-factor exposures for which the typical fund was unrewarded. While funds of hedge funds can deliver a valuable product, sloppy manager selection and portfolio construction typically result in less-than-pure alpha generation. A naive selection of a fund of hedge funds may thus lead to assuming relatively expensive common-factor exposure without necessarily accessing significant skill-based returns. A multifactor modeling of fund of hedge fund returns can help to identify skillful value-added.TOPICS: Real assets/alternative investments/private equity, portfolio construction ER -