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Title: The risk parity approach and fund of hedge funds Authors:  Eirini Bersimi - University of Kent (United Kingdom) [presenting]
Ekaterini Panopoulou - University of Essex (United Kingdom)
Nikolaos Voukelatos - University of Kent (United Kingdom)
Abstract: The focus is on the risk-based approach, namely Risk Parity (RP) to asset allocation and fund of hedge funds creation. In more detail, we construct RP portfolios consisting of Hedge Funds (HF) which are competing against, the relatively new, Hedge Funds Research (HFR) RP Indices in an attempt to outperform them. The RP portfolios consist of the best 25 funds, and their performance is evaluated by typical hedge fund evaluation measures. The empirical results suggest that, for both volatility targets (10\% and 12\%), the constructed portfolios outperform the HFR Indices in the out-of-sample period.