Hedge Funds, Active Management, and the Asset Allocation Decision: A Descriptive Framework

Jul 4th, 2006 | Filed under: CAPM / Alpha Theory

By: Roy D. Henriksson
Published: February 2004

Excerpt: 

For all active managers, skill-based performance can and should be separated from the returns available from passive investments.  This separation results in an active portfolio that includes all of the investments that are the result of market-timing or security-selection decisions and nothing else. This active portfolio reflects the complete separation of the skill-based investment decisions from the appropriate benchmark or passive portfolio. This separation creates two advantages: first, it allows all investment managers to be evaluated relative to each other, and; second, it allows hedge fund managers, and all other active managers for that matter, to be evaluated as a potential active management overlay on the policy portfolio within the context (or framework) of the asset allocation decision.”

For more infrmation on this article, contact chris@holtcapitaladvisors.com

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