Every hedge fund manager and every trader wants to know what strategies are employed in a fund ran by his competition. The curiosity is even stronger if we want to see how strategies are mixed in the kitchen of the most successful hedge funds. Top performing funds are usually notoriously secretive about their portfolios. But we still can learn something from the history of their monthly returns. One such interesting methodology is described in a research paper written by Canepa, Gonzalez, and Skinner. Their analysis hints that the top-performing hedge funds are usually successful because they are able to manage their factor exposure better. They are not dependent so much on classical equity risk factors as average funds are. And if they are exposed to some risk factor, the top-performing hedge funds are able to close underperforming factor strategy sooner than average funds.
Authors: Canepa, Gonzales, Skinner
Title: Hedge Fund Strategies: A non-Parametric Analysis