Hedgefonds-Strategien und Asset-based Style-Faktoren

Abstract

Hedge Fund Strategies and Asset-based Style Factors

Traditional factor models are unsatisfactory for explaining hedge-fund returns because hedge funds act in accordance with dynamic trading strategies and because the returns they produce correlate poorly with those of traditional asset classes. But hedge funds do not at all generate returns, high in absolute terms, without systematic risks being accepted in this regard. They show strong systematic risks that are strategy-specific in nature, however. For this reason, a precise (qualitative) analysis of the strategies applied by hedge funds is necessary in order to identify the type of such systematic risks. Asset-based Style (ABS-)factor models can be used for making a subsequent quantitative analysis on the basis of those strategies. However, such models include a number of special characteristics such as the type and design of factors or the need to deal with non-linear properties. The benefit of such ABS factor models is substantial, because ABS factors permit to explain the systematic risks of individual hedge fund strategies and to model strategy-specific hedge fund benchmarks. Within the framework of a qualitative analysis, this article initially shows the kind of systematic risks involved in hedge funds. It subsequently submits to a critical discussion of ABS factor models as possible approaches to a quantitative analysis of returns and risk structures. The conclusion to be drawn therefrom is that a comprehensive and satisfactory explanation of the structures of returns and risks of hedge funds are still in their infant shoes, but that multiple insights have already been obtained. This article also shows possible starting points for future research activities.