Return-based classification of absolute return funds

We apply a return-based classification approach on a sample of absolute return funds registered for sale in Europe. The classification process results in eight groups with specific risk and return profiles. Each group can be characterized by two dimensions of an underlying investment style: asset al...

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Bibliographic Details
Published inJournal of asset management Vol. 16; no. 2; pp. 117 - 130
Main Authors Gerlach, Philipp, Maurer, Raimond
Format Journal Article
LanguageEnglish
Published London Palgrave Macmillan UK 01.03.2015
Palgrave Macmillan
Subjects
Asset allocation
Classification
Councils
Economics and Finance
Equity funds
Euromarkets
Finance
Financial Services
Hedge funds
Investment advisors
Investment policy
Money markets
Mutual funds
Original Article
Portfolio management
Reimbursement
Retroaction
Return on investment
Risk Management
State employees
Stock exchanges
Studies
Europe
style analysis
return-based classification
absolute return funds
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Summary:We apply a return-based classification approach on a sample of absolute return funds registered for sale in Europe. The classification process results in eight groups with specific risk and return profiles. Each group can be characterized by two dimensions of an underlying investment style: asset allocation and trading strategy. While the returns of one group are largely determined by the asset allocation, the returns of the seven other groups are driven by different trading strategies. Our estimated classification explains 20 per cent of the in-sample and 13 per cent of the out-of-sample cross-sectional return variation, which is superior to existing approaches.
ISSN:1470-8272
1479-179X
DOI:10.1057/jam.2015.9