RT Journal Article SR Electronic T1 Optimal Portfolio Allocation Using Funds of Hedge Funds JF The Journal of Wealth Management FD Institutional Investor Journals SP 85 OP 95 DO 10.3905/jwm.2006.644221 VO 9 IS 2 A1 Jean-Pierre Gueyié A1 Serge Patrick Amvella YR 2006 UL https://pm-research.com/content/9/2/85.abstract AB This paper compares different methods of optimization for a portfolio allocation that includes funds of funds. Optimization consists of minimizing risk measured by one of the following proxies: normal Value at Risk (VaR), adjusted VaR (adjusted using the Cornish-Fisher expansion), weighted historical simulation VaR, and semi-deviation. Results indicate that compared to the other proxies of VaR, normal VaR tends to underestimate portfolio risk. Moreover funds of funds improve the risk-return profile of the portfolio. This last result is interesting since funds of hedge funds exhibit less of the individual hedge funds' biases reported in the literature.TOPICS: Real assets/alternative investments/private equity, VAR and use of alternative risk measures of trading risk, statistical methods, portfolio construction