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> The correct benchmark for a hedge fund is T-bills T-Bills are virtually risk free, which is not the case of hedge funds, so why would you compare one with th
by Voloskaya 6y ago
> The correct benchmark for a hedge fund is T-bills
T-Bills are virtually risk free, which is not the case of hedge funds, so why would you compare one with the other?
> But the point is an investment that's about equal to the S&P, yet uncorrelated to the S&P
How can you say that a hedge fund's return and the S&P are uncorrelated? They may not be identical but they are very strongly correlated.
- gvhst 6y agoMany hedge fund's run a factor neutral (market + other risk factors are hedged out of the portfolio) long short book. If done right (and thats the catch) there should be low correlation to S&P. T-bills are the performance benchmark for hedge funds but not the risk benchmark (which is generally something riskier). This can sound counterintuitive as T-bills are a very low hurdle to clear. However, in a downturn scenario generally causes rates to fall, increasing t-bill return when the rest of the market goes down. In that case its a very difficult hurdle to clear.
- Voloskaya 6y agoDo you happen to have any resource that dives into this? This is really interesting would love to know more about how this works in details.