FINM 3008/6016 Applied Portfolio Construction Tutorial #9

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FINM 3008/6016 Applied Portfolio Construction

Tutorial #9 – Outline

Question 1

What advantages might be gained by an institutional investor, such as a DC pension fund, from holding substantial over-weighting in alternative assets relative to their peer group? What disadvantages, risks or challenges might be associated with such a position?

Question 2

Below is a list of six hedge fund strategies or styles. Do some reading on the nature of each. (Exhibit 11.3 in the course text is a start, but there is plenty of information on the internet).

(i) Credit long/short

(ii) Convertible arbitrage

(iii) Merger arbitrage

(iv) Distressed securities

(v) Quant market-neutral equity

(vi) Global macro  

Be prepared to discuss the points below with regard to each strategy or style:

a) What is the likely source of alpha generation?

b) Is the strategy directional or non-directional?

c) What (if any) are the main market risk exposures?

d) Is it likely to have low, medium or high capacity?

The table below provides a template for the answers.