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CHAPTER 6 - Funds of Hedge Funds > STATISTICAL BUCKETING BY STRATEGY

STATISTICAL BUCKETING BY STRATEGY

A typical fund of hedge funds will invest in a portfolio of 10 to 100 underlying hedge fund managers. The fund of funds usually has a bucket allocation system based on hedge fund strategies. Therefore, the buckets would constitute long-short equity strategies, global macro strategies, relative value strategies, etc. It will predefine these buckets as well as the percentage of its assets to be allocated to these buckets based on its market research. It might also do a further subdivision of its buckets based on geography. If it feels that the opportunities in the Asian markets would exceed the opportunities in the European markets, it might allocate a larger percentage of its assets to the Asian sub-bucket.

  

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