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Korean Journal of Financial Studies 2014;43(3):605-632.
Published online June 30, 2014.
The Effect and Measures of Investing in Hedged Funds by the Korean Long-Term Investors
Seung Yeon Won
헤지펀드의 투자 효과와 활용 방안
This paper suggested that the korean long-term investors should invest in hedge funds, under the circumstances surrounding the domestic asset markets where the rates of returns are decreasing in the long run. In addition, this paper analyzed how for long-term investors to invest in hedge funds. According to the empirical tests, hedge funds would contribute to increasing performance of total portfolio including hedge funds by portfolio diversification effect, while they would increase the downside risk of the portfolio because the non-normal distribution of hedge fund returns may increase the fat-tail risk of portfolio. However, allocating the hedge funds as one of alternative assets in portfolio, the negative effect of increased portfolio risk is estimated not be bigger than the positive one from its diversification effect. The empirical results also show that the risk of hedge funds was not bigger than other alternative investment assets such as private equity funds. In results, this paper proposed that korean long-term investors should invest in hedge funds for advancing the portfolio expected returns, with constraint of limiting the maximum allocation ratio in portfolio.
Key Words: 대체자산,자산수익률,장기투자자,투자위험,헤지펀드,Alternative Investments,Asset Returns,Hedge Funds,Investment Risk,Long-Term Investors
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