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ABC Quant

Fund Risk Valuation Print E-mail

Risk assessment and valuation of hedge funds are challenging tasks because of the unique hedge fund problems deriving from the lack of transparency, numerous biases and vague regulations.

Most of the conventional valuation frameworks used institutional investment managers for ages become hardly applicable when it comes to hedge funds. Not surprisingly, the investment vehicles built on such valuation techniques lead to a weak performance and unpredictable risks.

The major problems affecting hedge fund valuation could be summarized as follows:

  • Inapplicability of the mean-variance framework because of non-normality of their distributions of returns
  • Inapplicability of the CAPM because of non-convexity of the efficient frontier
  • Low or even negative correlations with the corresponding indices
  • Biases in hedge fund data
  • Short return series

Addressing the above problems the Quant Group offers the most sophisticated range of risk valuation services specially designed for hedge funds:

  • Valuation of the applicable risks: market, credit, concentration, liquidity, strategy, operational, legal and fraud risk
  • Quantitative risk assessment across traditional and advanced metrics including VaR, MVaR, CVaR, tail risks, skewness and kurtosis, hurst and many more
  • Market multi factor analysis (manager performance attribution and style analysis)
  • Peer Group comparison analysis (across all the funds of the available fund universe)
  • Rolling dynamic risk/return charts
  • Best distribution fit
  • Distribution non-normality assessment