This paper examines hedge fund portfolio selection approaches in isolation and in the context of an investor’s overall portfolio. Characteristics-based portfolios that minimize risk delivers superior out-of-sample performance. For instance, a minimum variance portfolio tilting toward small funds with high alpha and strategy distinctiveness index and low systematic risk delivers an annualized Sharpe ratio of 2.03 with a maximum drawdown of 5.20%. Investors realize diversification benefits by shifting a portion of their wealth from 60 to 40 equity-bond portfolio to characteristics-based hedge fund portfolio. Investors recognize the attractiveness of characteristics-based portfolios, but do not target flows enough to erode their superior performance.

本文在投资者的整体投资组合的背景下，孤立地研究了对冲基金投资组合的选择方法。最小化风险的基于特征的投资组合可提供卓越的样本外表现。例如，一个最小方差投资组合倾向于具有高 alpha 和策略独特性指数以及低系统风险的小型基金，其年化夏普比率为 2.03，最大回撤为 5.20%。投资者通过将一部分财富从 60 到 40 股债券投资组合转移到基于特征的对冲基金投资组合来实现多元化收益。投资者认识到基于特征的投资组合的吸引力，但没有以足够的流量为目标来削弱其卓越的表现。