Risk-Adjusted Performance of Funds of Hedge Funds Using a Modified Sharpe Ratio

By Greg N. Gregoriou, Jean-Pierre Gueyie. 2003

195 citations recorded by the source corpus.

Many institutional investors use the traditional Sharpe ratio today to examine the risk-adjusted performance of funds of hedge funds (FOFs). However, this could pose problems due to the non-normal returns of this alternative asset class. A modified value at risk (VaR) and modified Sharpe ratio solves the problem and can provide a superior tool for correctly measuring risk-adjusted performance. In this article, the authors rank 30 funds of hedge funds according to the Sharpe and modified Sharpe ratio. Their results indicate that the modified Sharpe is lower and more accurate when examining non-normal returns.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/372e3f09d9bd4df7926079f3a5db8b07ec6a3381

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In Economics and Econometrics

1. Martin Eling
2. Andreas Kleefeld
3. R. Faust
4. M. Delignette-Muller
5. Vytaras Brazauskas
6. Christophe Dutang

In Finance

1. Martin Eling
2. R. Faust
3. Andreas Kleefeld
4. M. Delignette-Muller
5. Vytaras Brazauskas
6. Christophe Dutang

In Management Science and Operations Research

1. Martin Eling

Citations in the corpus

• Does the Measure Matter in the Mutual Fund Industry? (2008, background): “From a theoretical point of view, the Sharpe ratio is consistent with expected utility maximization under the assumption of elliptically distributed returns (Ingersoll 1987). Even without the assumption of elliptically distributed returns, mean–variance analysis of mutual funds and hedge funds appro”