Absolute return hedge fund

问题如下：

Eileen Gension is a portfolio manager for Zen-Alt Investment Consultants (Zen-Alt), which assists institutional investors with investing in alternative investments. Charles Smittand is an analyst at Zen-Alt and reports to Gension. Gension and Smittand discuss a new client, the Benziger University Endowment Fund (the fund), as well as a prospective client, the Opeptaja Pension Plan (the plan).

The fund’s current portfolio is invested primarily in public equities, with the remainder invested in fixed income. The fund’s investment objective is to support a 6% annual spending rate and to preserve the purchasing power of the asset base over a 10-year time horizon. The fund also wants to invest in assets that provide the highest amount of diversification against its dominant equity risk. Gension considers potential alternative investment options that would best meet the fund’s diversification strategy.

In preparation for the first meeting between Zen-Alt and the fund, Gension and Smittand discuss implementing a short-biased equity strategy within the fund. Smittand makes the following three statements regarding short-biased equity strategies:

Statement 1： Short-biased equity strategies generally provide alpha when used to diversify public equities.

Statement 2： Short-biased equity strategies are expected to provide a higher reduction in volatility than bonds over a long time horizon.

Statement 3： Short-biased equity strategies are expected to mitigate the risk of public equities by reducing the overall portfolio beta of the fund.

Gension directs Smittand to prepare asset allocation and portfolio characteristics data on three alternative portfolios. The fund’s risk profile is one factor that potential lenders consider when assigning a risk rating to the university. A loan covenant with the university’s primary lender states that a re-evaluation of the university’s creditworthiness is triggered if the fund incurs a loss greater than 20% over any one-year period. Smittand states that the recommended asset allocation should achieve the following three goals, in order of priority and importance:

• Minimize the probability of triggering the primary lender’s loan covenant.
• Minimize the probability of purchasing power impairment over a 10-year horizon.
• Maximize the probability of achieving a real return target of 6% over a 10-year horizon.

Smittand provides data for three alternative portfolios, which are presented in Exhibits 1 and 2.

Notes:

• One-year horizon 99% VaR: the lowest return over any one-year period at a 99% confidence level
• One-year horizon 99% CVaR: the expected return if the return falls below the 99% VaR threshold
• Probability of purchasing power impairment: the probability of losing 40% of the fund’s purchasing power over 10 years, after consideration of new gifts received by the fund, spending from the fund, and total returns

Gension next meets with the investment committee (IC) of the Opeptaja Pension Plan to discuss new opportunities in alternative investments. The plan is a $1 billion public pension fund that is required to provide detailed reports to the public and operates under specific government guidelines. The plan’s IC adopted a formal investment policy that specifies an investment horizon of 20 years. The plan has a team of in-house analysts with significant experience in alternative investments.

During the meeting, the IC indicates that it is interested in investing in private real estate. Gension recommends a real estate investment managed by an experienced team with a proven track record. The investment will require multiple capital calls over the next few years. The IC proceeds to commit to the new real estate investment and seeks advice on liquidity planning related to the future capital calls.

Which asset class would best satisfy the Fund’s diversification strategy?

选项：

A.

Private equity

B.

Private real estate

C.

Absolute return hedge fund

解释：

C is correct. An absolute return hedge fund has a greater potential to diversify the fund’s dominant public equity risk than either private equity or private real estate. Absolute return hedge funds exhibit an equity beta that is often less than that of private equity or private real estate. Also, absolute return hedge funds tend to exhibit a high potential to diversify public equities, whereas equity long/short hedge funds exhibit a moderate potential to fulfill this role.

A is incorrect because although private equity provides moderate diversification against public equity, an absolute return hedge fund has a greater potential to do so. The primary advantage of private equity is capital growth.

B is incorrect because private real estate provides only moderate diversification against public equity, whereas absolute return hedge funds have a greater potential to do so. The primary advantage of private real estate is income generation.

C是正确的。 与私募股权或私人房地产相比，An absolute return hedge fund在分散基金主要公共股权风险方面具有更大的潜力。 An absolute return hedge fund的股票贝塔系数通常低于私募股权或私人房地产的贝塔系数。 此外，An absolute return hedge fund在分散公开股票方面往往表现出很高的潜力，而股票多头/空头对冲基金则表现出适度的潜力来发挥这一作用。

A 是不正确的，因为尽管私募股权相对于公共股权提供适度的多元化，但An absolute return hedge fund有更大的潜力这样做。 私募股权的主要优势是资本增长。

B 是不正确的，因为私人房地产仅提供相对于公共股票的适度多元化，而An absolute return hedge fund有更大的潜力这样做。 私人房地产的主要优势是创收。

由于私人房地产和二级市场上的上市公司一样会受到一些宏观因素的影响（例如利率），所以只是部分的分散化的效果，但是分散化更好的主要还是Absolute return hedge fund，其β对冲掉了，基本只剩α的影响了，所以不受宏观因素的影响，使得其分散化更好。