CFA says The two characteristic of the returns distribution associated with alternative investment strategies that reduce downside risk are positive skewness and low kurtosis. I draw the distribution graphs and thought the other way round. Can somebody please explain

hi Remember that this is reference to the normal distro. if a distro has positive skewness, then it’s “pushed” to the right (from looking at the standard bell curve) if a distro has lower kurtosis, it gets more “peaked” (i think negative kurt spreads the results out more uniformly) so, with respect to shortfall, if a distro had positive skew and low kurtosis, it would be more predictable with respect to the fact that there is less dispersion in the returns (tight grouping), and that they were shoved to the right a bit (thus increasing the density above the shortfall return level).

Many AIs have negative skewness and high kurtosis (fat tails), which creates a higher probability of highly negative returns compared to an asset whose returns are normal. To counter-balance those characteristics, you would want to complement an AI portfolio with assets that exhibit positive skewness and low kurtosis so that the overall portfolio has a return distribution that is more ‘normal’ looking.

Oh now I got it…many thanks guys