Abstract
This paper describes how macroeconomic factors are used to aid in the decision-making process of allocating capital to hedge fund managers (applicable to traditional managers as well). A comparison is made between traditional portfolio construction methods and the Dynamic Asset Allocation methodology used in this paper to determine how each portfolio would have performed during the drawdown period in the 4th quarter of 2008. Our proprietary tools use the patented technology in DynaPorte to combine both macroeconomic factors with market risk factors to determine not only what factors influence returns at a given time, but also what may be influencing a manager's behavior during varying macroeconomic periods.
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