Focus On: Portfolio Construction – October 2011 Adobe PDF icon

Laurent Favre – AlternativeSoft AG

The proposed portfolio construction technique is an equal volatility contribution technique. It allows building of well diversified strategic portfolios, but is not recommended for tactical portfolios (when horizon <12months). However, with this technique, we have not been able to reach our three objectives:

a) Outperform out-of-sample four of our five benchmarks
has been achieved;

b) Generate at least 5% per annum has been achieved;

c) Have positive returns, every year, from 1996 to 2011 has not been achieved.

Using the same portfolio construction technique, our next research will focus on directly investing in hedge funds and mutual funds in order to outperform an equally weighted portfolio and on building portfolios with equal volatility contribution between funds.

Leave a Reply