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2002•The Journal of Alternative InvestmentsRequires access

Hedge Fund Diversification

François‐Serge Lhabitant, Michelle Learned

Open publisher page 72 citations

Abstract

There are many benefits to investing in hedge funds, particularly when using a diversified multi-strategy approach. Over recent years, multi-strategy funds of hedge funds have flourished and are now the favorite investment vehicle of institutional investors exploring the world of alternative investments. More recently, funds of hedge funds that specialize within an investment style have also emerged. The authors study the impact of diversification on naively constructed (randomly chosen and equally weighted) hedge fund portfolios. They provide insight into style diversification benefits as well as the inter-temporal evolution of diversification effects on hedge funds.

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What this paper is about

There are many benefits to investing in hedge funds, particularly when using a diversified multi-strategy approach. Over recent years, multi-strategy funds of hedge funds have flourished and are now the favorite investment vehicle of institutional investors exploring the world of alternative investments. More recently, funds of hedge funds that specialize within an investment style have also emerged. The authors study the impact of diversification on naively constructed (randomly chosen and equally weighted) hedge fund portfolios. They provide insight into style diversification benefits as well as the inter-temporal evolution of diversification effects on hedge funds.

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OpenAlex reports 72 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

There are many benefits to investing in hedge funds, particularly when using a diversified multi-strategy approach. Over recent years, multi-strategy funds of hedge funds have flourished and are now the favorite investment vehicle of institutional investors exploring the world of alternative investments. More recently, funds of hedge funds that specialize within an investment style have also emerged. The authors study the impact of diversification on naively constructed (randomly chosen and equally weighted) hedge fund portfolios. They provide insight into style diversification benefits as well as the inter-temporal evolution of diversification effects on hedge funds.

Key concepts: Hedge fund, Alternative beta, Diversification (marketing strategy), Fund of funds, Global assets under management, Alternative investment, Open-end fund, Business

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