Hedge Funds: Due Diligence

LEVEL: INTERMEDIATE LEVEL

▪	Understand the bases of comparison for performances and their representation biases
▪	Analyse hedge fund performances in order to find the exposures at each risk premium
▪	Audit the manager so as to identify the best approaches in the future
▪	Structure an optimum hedge fund portfolio

▪	Representation bias - Intermediate
▪	Synthetic replication - Intermediate
▪	Due diligence - Intermediate
▪	Exposure diversification and risk control -Intermediate
▪	Structured products on hedge funds - Intermediate

▪	Pragmatic analysis of hedge fund performance sources
▪	Operational suggestions for the selection process
▪	Procedures for constructing a diversified portfolio
▪	Comparison between the results of different investment structures

Benchmark
▪	Index categories: selectivity and discrimination
▪	Style consistency
▪	Survivorship bias and backfill bias
▪	Investable indices
▪	Practical Workshop . Estimate a survivorship bias
Performance Analysis
▪	Simple regression
▪	Emerging risk premiums
▪	Asymmetrical risk
▪	Integrating liquidity risk
▪	Practical Workshop . Performance analysis methodologies
Replication Strategies
▪	Alternative alphas and betas
▪	Risk premium
▪	Synthetic offerings
▪	Tailor-made solutions
▪	Case Study . Find alternative betas
Funds of Funds: Selection
▪	Initial selection
▪	Due diligence questionnaire
▪	Interview
▪	Negotiate the conditions
▪	Case Study . Analyse a questionnaire
Funds of Funds: Diversification
▪	Risk types
▪	Parameters to be optimised: volatility, skewness, kurtosis
▪	Risk weighting or cash?
▪	Overlay?
▪	Case Study . Capacity and selection constraints
Structure Products
▪	OBPI
▪	CPPI
▪	Options on CPPI
▪	Hedge fund cloning platforms:
▪	CFO
▪	Case Study . Perform a risk analysis and choose the best CPPI structure