Hedge Fund Portfolio Optimization: Advanced Techniques

Explaining problems of non-linear portfolio optimization for hedge funds and fund of funds. Tail-based metrics and objective functions (CVaR, LPM, VaR, MVaR, Omega etc). Constructing market-neutral portfolios. Beta constraints and user-defined objective functions. Risk Shell portfolio optimization component explained.

Unique Problems of Hedge Fund Portfolio Optimization

• Learn advanced portfolio optimization models applicable to non-normal distributions of returns.
• Understand why the mean-variance methodology is not applicable to hedge funds.
• Understand beta constraints (market factor exposures) for constructing market-neutral portfolios.
• Understand the optimization framework of Risk Shell.

Fund of Funds Portfolio Optimization

• Introduction to advanced objective functions that take into account the non-normality of return distributions: Conditional Value-at-Risk (CVaR), Omega, Maximum Drawdown, Conditional Drawdown (CDaR) and Lower Partial Moments (LPM).
• Risk Shell optimization component: setting objective functions and constraints.
• User-defined objective functions for portfolio optimization.
• Advanced optimization functions: backtesting and background optimization.

Market-Neutral Portfolio Optimization

• Market-neutral portfolios (hedge fund of funds and multi-asset): defining the optimization model.
• Risk Shell tools to add factor constraints to the optimization model.

Hedge Fund Portfolio Liquidity and Exposure Optimization

• How to define liquidity and exposure constraints.
•  Working with β tables for optimization constraints.

Potential Audience

Institutional portfolio managers, hedge FoF and multi-asset portfolio managers, CIOs, advanced family offices.