Hi everyone. Hope somebody answers this question:
Say you’re a fund of funds and you wish to know if a specific fund is a great addition to your portfolio. Aside from the typical correlation analysis in which you study the correlation of the “new fund” to the existing portfolio, what else would you consider before finally pulling the trigger and adding that investment? Let’s say that you’re provided with holdings data and historical performance returns.
Thanks in advance!!
So many factors…are you looking for
risk reducer or return enhancer
is your current portfolio value or growth (adding the other you don’t have)
Adding yield to your portfolio?
If you are considering alternatives (hedge funds or PE), then the number of questions explodes.
If fund salesperson is female: how hot she is on a scale of 1/10.
If male: how badly he let you defeat him in golf.
More or less it is like that.
Looking for risk reducer addition and an absolute return fund. What do you guys think?
I’ve seen a few fads come and go over the last several years. Buyers wanted high tracking error, then high active share, and now it’s all about non-correlated asset classes. None of those attributes are wrong to take into consideration, but there’s so much more to think about. Currently, I see so many investors suffering from “di-worse-ification” where they’re trying so hard to mitigate losses they also reduce nearly all their upside.
Here’s a partial list of things some of the best and brightest clients I work with consider when looking to add/replace a fund:
And each of those factors have many things to consider on their own.
Oh, and what ohai said.