Managing Risk in Alternative Investment Strategies: Successful Investing in Hedge Funds and Managed Futures

321 Pages·2002·1.49 MB·English

by  Lars Jaeger

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Managing Risk
in Alternative
Investment Strategies
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Managing Risk
in Alternative
Investment Strategies
Successful Investing in Hedge Funds
and Managed Futures
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First published in Great Britain 2002
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To my wife Julie
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About the author
Lars Jaeger is a Partner of Partners Group, one of the largest European alternative
asset managers, based in Zug, Switzerland. He was a Managing Director and
Co-founder of saisGroup, a Swiss-based specialist firm for multi-manager
Alternative Investment Strategies (AIS) portfolios, which merged with Partners
Group in late 2001. He is responsible for quantitative analysis and risk management
for the Hedge fund portfolios managed at Partners Group.
Lars holds a PhD degree in theoretical physics from the Max-Planck Institute
for Physics of Complex Systems in Dresden, Germany (1997). He studied physics
and philosophy at the University of Bonn and Ecole Polytechnique in Paris. He
worked as a researcher in different areas of theoretical physics (quantum field
theory, atomic physics, and chaos theory).
Lars started his financial career at Olsen and Associates in Zurich as a quantita-
tive researcher, where he designed econometric and mathematical models for
financial markets (systematic trading models, portfolio and risk management).
He subsequently moved to Credit Suisse Asset Management, where he was
responsible for risk management and quantitative analysis of Hedge fund and
Managed Futures strategies.
Lars is author of numerous research publications in various leading scientific
journals and has been a regular speaker at diverse seminars and workshops.
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Contents
Preface xiii
1 Introduction 1
Changing investor demand 3
LTCM: What can go wrong for Hedge fund investors 5
Why effective risk management is crucial to realizing the
benefits of AIS 6
A new investment paradigm 7
The AIS investment approach and integrated risk management for
multi-manager portfolios (‘fund of funds’) 8
Is transparency achievable in AIS investments? 9
Liquidity of AIS investments 13
The challenges of AIS risk management 14
Notes 15
2 The Universe of Alternative Investment Strategies (AIS) 17
Definition of the AIS Universe 17
Development of AIS 20
Understanding the sources of AIS returns 24
Economic functions and Risk premiums 27
The structure of AIS multi-manager funds 31
Notes 34
3 Alternative Investment Strategies:
Hedge funds and Managed Futures 38
Hedge fund strategies 38
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