PT - JOURNAL ARTICLE AU - Jean L. P. Brunel TI - Evaluating the Performance of Alternative Strategies Relative to Long-Only Public Market Benchmarks AID - 10.3905/jwm.2021.1.146 DP - 2021 Oct 31 TA - The Journal of Wealth Management PG - 128--142 VI - 24 IP - 3 4099 - https://pm-research.com/content/24/3/128.short 4100 - https://pm-research.com/content/24/3/128.full AB - The performance of alternative strategies is notoriously challenging to analyze. Beside the fact that managers often profess to be agnostic as to the kind of risk they should be taking, investors often seek a well-defined risk management process. The current literature provides solid insights as to the benefit of various forms of risk factor analysis, the results of which can then be used as a means to assess actual manager performance. This article follows on that line of thought, with an important modification: the use of rolling betas relative to a qualitatively identified public market proxy. The author finds that the results point to significant volatility in betas, suggesting that managers indeed vary their market risk exposure over time; on the other hand, he finds that alphas derived from this methodology tend to be lower and less volatile than those computed based on a fixed strategic risk exposure. He postulates that the results may well be more representative of reality.Key Findings▪ Hedge fund performance is notoriously difficult to assess, particularly relative to a market benchmark. Trying to allocate return between market or risk exposure and skill and to allocate excess return between tactical risk management and security or instrument selection has been quite difficult. ▪ Performance analysis practices within the asset management industry cover a wide range of approaches from peer comparisons to public market benchmarks.▪ The use of statistically computed beta factors relative to a qualitatively derived principal strategy risk can afford a better perspective of public market opportunities and thus of relative performance analysis as compared with a public market benchmark.