The added value of hedge funds in an asset-liability framework

Authors: Otruba, Susanne; Quesada, Carmen; Scholz, Stefan

Source: Journal of Asset Management, Volume 6, Number 6, 1 March 2006 , pp. 433-444(12)

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Abstract:

Institutional investors currently face the challenge of being able to meet their future financial obligations. A particular problem for pension plans is the task of finding asset classes which allow them to achieve the necessary returns to pay out agreed benefits and avoid the risk of defaulting on the plan's liabilities. This paper applies quantitative methods for analysing the attractiveness of hedge funds in an asset and liability framework and their impact on the funding status of pension funds. The research suggests that hedge funds add value by improving the risk-return profile of the portfolio and help to lower the probability of underfunding.Journal of Asset Management (2006) 6, 433-444; doi:10.1057/palgrave.jam.2240193

Document Type: Research article

DOI: http://dx.doi.org/10.1057/palgrave.jam.2240193

Affiliations: 1: 1RMF Investment Management, Huobstr. 16, 8808 Pfäffikon SZ, Switzerland., Tel: +41 (055) 417 7710, Fax: +41 (055) 417 7711, Email: carmen.quesada@rmf.ch

Publication date: 2006-03-01