Hey Guys, I am using Schweser only, and it does not seem to be talking much about the details of Hedge Funds, barely touches up on them…Can someone who has used CFAI books tell me if there are more to it or is it actually really small basic qualitative stuff? Thanks
If you know what the Sortino ratio is then you should be fine. If not, read the CFAi books.
Had a look through CFAI text as well as Schweser for this. Not much additional detail in CFAI text either…just waffles on a bit more…can’t see how there will be a vignette solely on HFs so don’t get too bogged down.
isnt Sortino is similar to Sharpe?
Yes, its similar. Instead of using Standard Deviation in the denominator, it uses the downside deviation, which more or less is the st. dev of returns below the target ROR.
Sortino Ratio!!! Is that the one like Sharpe Ratio but with downside risk instead of std dev. and min. acceptable return instead of risk free? so : (Asset Return(HF in this case)-Min. Acceptable Return) / Downside Risk? That is as much as I know about it… Is that enough? or is there more detail in CFAI Cirr. that I need to know?
LanceTX beat me to the answere while I was typing LOL
right…recall, emphasis is on downside risk like drawdown and VaR
All about left-tail risk.
can you elaborate on the left-tail risk ?
Traditional measures of risk assume a normal distribution. It is generall accepted that hedge fund returns aren’t normally distributed. They have fat tails on the left side (not good). So the risk measures that the others described above (max drawdown, var) attempt to model this risk. Each has it’s own strenghts and weaknesses.
mwvt gave an excellent summary. you might want to know two more things about hedge funds: some hedge funds are highly leveraged (especially fixed income arbitrage funds) and there is several kinds of biases in hedge fund databases that make hedge fund performance look good.
Good points^. Benchmarking is the only other issue I can think of without looking back at the material.
Dude. This isn’t in Schweser.
Yes it is jackass…at the very end. I covered it yesterday afternoon AT YOUR HOUSE! Hahahaaa
am screwed…don’t remember any of this…will need to review… dammit!