Tactical Asset Allocation: Why It Cannot Be Used For Hedge Funds

A special event webinar dedicated to TAA (Tactical Asset Allocation) for alternative investments. Tactical Asset Allocation: why it is inapplicable to hedge funds. Major problems and drawbacks of TAA for hedge funds. Analysis of correlations between individual funds and their indices.

The TAA (Tactical Asset Allocation) framework implies constructing investment portfolios based on asset classes of underlying instruments and short-term performance forecasting of the corresponding indices. Originated from the traditional asset classes, TAA is often used for hedge FoF construction. However, when applied to alternative investments, it presents a highly misleading concept:

• Fund managers may use multiple strategies, which makes it difficult to categorize
• The whole TAA framework relies on the style-weighted allocation (read index-weighted allocation) that predetermines allocation across individual funds. Since the majority of hedge funds are not correlated with their corresponding indices, the applicability of the TAA becomes questionable.

The TAA framework should not be applied for constructing portfolios of hedge funds (hedge fund of funds). This tutorial explains the major problems of applying the TAA techniques for hedge fund portfolios and guides you through the alternative methods of constructing portfolios of hedge fund of funds, from the practitioner's standpoint.

Tactical Asset Allocation And Why It Cannot Be Applied To Hedge Funds

• Understand the limitations and drawbacks of the TAA techniques.
• Hedge Fund biases and how they relate to the TAA models.
• The ambiguity of hedge fund indices and manager classifications.

Risk Shell Portfolio Construction Techniques - Step-by-step Tutorial For Hedge Fund Investors

• Using advanced manager selection techniques for portfolio construction: Macroeconomic Scenario Screening™ and Trend Segmentation™.
• Using portfolio optimization and risk budgeting techniques for fund of funds and hedge fund portfolios.
• Enhancing portfolio diversification with the Market Neutral Portfolio Builder. Factor Exposure diversification.
• Working with the Style Analysis component to overcome the ambiguity of manager strategy classifications.

Potential Audience

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