Abstract
In this article, we analyze the return distribution of Hedge Funds strategies and their correlation with the returns of a traditional portfolio. The aim is to identify the characteristics of each Hedge Fund investment strategy in order to be able to construct an optimal Hedge Fund portfolio for a Swiss pension fund. We will show that the classical linear correlation and the classical linear regression cannot be applied for Hedge Funds. Moreover, we will demonstrate that only three strategies (Convertible Arbitrage, Market Neutral and CTA) give diversification during market downturns.
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