TY - JOUR T1 - Stocks, Bonds, and Hedge Funds JF - The Journal of Portfolio Management SP - 113 LP - 120 DO - 10.3905/jpm.2003.319900 VL - 29 IS - 4 AU - Gaurav S. Amin AU - Harry M. Kat Y1 - 2003/07/31 UR - https://pm-research.com/content/29/4/113.abstract N2 - What are the diversification effects of introducing hedge funds into a portfolio of stocks and bonds? In terms of skewness and kurtosis, equity and hedge funds do not combine very well. Although hedge funds significantly improve a portfolio's mean-variance characteristics, their inclusion can also be expected to lead to significantly lower skewness as well as higher kurtosis. Hedge funds do not provide a free lunch, but rather entail a definite trade-off between profit and loss potential. To have any impact on the overall portfolio, allocations to hedge funds would have to far exceed the typical 1% to 5% that many institutions typically consider. ER -