Hedge Fund and Commodity Fund Investments in Bull and Bear Markets
- 31 July 2001
- journal article
- Published by With Intelligence LLC in The Journal of Portfolio Management
- Vol. 27 (4), 97-108
- https://doi.org/10.3905/jpm.2001.319817
Abstract
A primary motivation for investing in hedge funds and commodity funds is to diversify against falling stock prices. The authors evaluate the performance of 16 different such funds during rising and falling stock markets between 1990 and 1998 both as stand–alone assets and as portfolio assets. They use the Sharpe ratio and alternative safety–first criteria to evaluate performance. The conclusion is that commodity funds generally provide more downside protection than hedge funds. Commodity funds have higher returns in bear markets than hedge funds, and generally have an inverse correlation with stock returns in bear markets. Hedge funds typically exhibit a higher positive correlation with stock returns in bear markets than in bull markets. Three hedge fund styles—market–neutral, event–driven, and global macro—provide fairly good downside protection with more attractive returns over all markets than commodity funds.Keywords
This publication has 9 references indexed in Scilit:
- On Taking the “Alternative” RouteThe Journal of Alternative Investments, 2000
- On the Performance of Hedge FundsCFA Magazine, 1999
- The Performance of Hedge Funds: Risk, Return, and IncentivesThe Journal of Finance, 1999
- Hedge Funds versus Managed Futures as Asset ClassesThe Journal of Derivatives, 1999
- Managed commodity fundsJournal of Futures Markets, 1999
- Offshore Hedge Funds: Survival and Performance, 1989–95The Journal of Business, 1999
- Survivorship Bias and Investment Style in the Returns of CTAsThe Journal of Portfolio Management, 1997
- For better performanceThe Journal of Portfolio Management, 1988
- Professionally Managed, Publicly Traded Commodity FundsThe Journal of Business, 1987