Why Analyze Hedge Funds with PMVD?
Evaluating the Case Study
The fund is small cap and market but not style neutral. Style analysis results are way off. The importance of small cap can be found with effort in the factor model, but other exposures are distorted. PMVD clearly shows the importance of short small growth. The fund-of-funds manager holding this fund reports that the fund had a long volatility strategy.
The PMVD short large growth exposure is not obvious from the fund’s holdings. However, it is statistically robust over years and should not be ignored. It may be a due the fund’s quantitative selection or trading strategy.
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