The Handbook of Alternative Investment Strategies

Abstract

WINTER 1999 T he editors of this book, Thomas Schneeweis and Joseph F. Pescatore, have collected various pieces on issues related to the benefits and strategies of the alternative investment. They provide the reader with a fairly comprehensive and informative overview of an important part of the most relevant empirical literature in the area. This book draws together articles demonstrating that managed futures, hedge funds, and other alternative investment strategies provide direct exposure to return patterns obtained from international financial and non-financial asset sectors not available from traditional stock and bond portfolios. While it is impossible in any single book to convey all the details of the benefits of managed futures, hedge funds, and a wide range of other alternative investment strategies, it should be clear to any reader of this book that academic evidence has shown that alternative investments potentially provide a means to 1) reduce portfolio volatility, 2) enhance portfolio returns in economic environments in which traditional stock and bond investments offer limited opportunities or produce losses, and 3) participate in a wide variety of new financial strategies and markets not available in traditional stock and bond portfolios. More precisely, the book contains six sections with twenty-two articles. I, especially, like the structure/organization of this book. For example, each section begins with an introduction part that briefly addresses the main issues and reviews articles contained in the section. Readers are also easily referred to a list of readings and books listed in the comprehensive bibliography and summary of selected articles in the many Exhibits in each section. In the first section, three papers introduce the theoretical basis and empirical evidence surrounding alternative investments. Authors in this section provide empirical evidence on the potential benefits of alternative investments in diversified investors’ portfolios and the theoretical and empirical bases for enlarging investors’ choice to include alternative investments. In the second section, eight articles represent the strategies and benefits on managed futures. The authors offer information on the existence of suitable investment benchmarks, the creation of managed futures portfolios through both passive and active manager choice, and the risk and return performance of managed futures. In the third section, four articles address some of the myths of investment in hedge funds, as well as to address some of the important issues in implementing a hedge fund investment strategy. The first article focuses on the selection of a suitable set of benchmarks for use in evaluating manager performance. In the next article, the question of efficient approaches to designing a hedge fund portfolio is addressed, using both Book Review