Riding the waves – how to achieve low correlation in volatile equity markets

Portfolio diversification and hedge fund investments

Most institutional investors use allocation in hedge funds to improve their performance or risk. However, investing in hedge funds with a large equity exposure does not necessarily provide the desired diversification during an equity market crisis. Figure 1 shows that historical six-year correlation between the CS Tremont Index and MSCI World is around 50%. One way to overcome this difficulty is to select hedge funds with a low correlation to equities, and to monitor the portfolio over time.

- Riding the waves – how to achieve low correlation in volatile equity markets (PDF, 113KB)

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