Portfolio Construction

Portfolio Optimization Software for Institutional Investors

Optimising a portfolio of funds is a different problem from optimising a portfolio of stocks. This page explains the methods institutional investors use, why hedge fund and private market allocations need more than a standard optimiser, and how the process runs in AlternativeSoft.

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This page covers:Optimisation methodsWhy funds are differentConstraints and stress testsHow it runs
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Aberdeen Asset Management•AllianceBernstein•BNP Paribas•Bessemer Trust•Raiffeisen Capital Management•Unigestion•Lyxor Asset Management•Kedge Capital•Lumyna Investments•Progressive Capital•Aberdeen Asset Management•AllianceBernstein•BNP Paribas•Bessemer Trust•Raiffeisen Capital Management•Unigestion•
In short
AlternativeSoft is portfolio optimization software for institutional investors who allocate to funds. It supports mean-variance, risk parity and tail-risk optimisation with mandate constraints, then stress tests the result and produces the committee report, all on a database of 500,000+ hedge funds, mutual funds and private market funds.

Why Optimising a Portfolio of Funds Is Different

  • Returns are not normal: Hedge fund returns show skew and fat tails, so an optimiser that only sees volatility understates the risk.
  • Histories are short and uneven: Funds launch at different times and report at different frequencies.
  • Liquidity is a constraint: Lock-ups, notice periods and capital calls limit how quickly weights can change.
  • Mandates set the boundaries: Strategy caps, manager limits and liability targets all restrict the feasible set.

Optimisation Methods Supported

MethodWhat it doesWhen it is used
Mean-varianceFinds the weights with the highest expected return for a given volatilityA starting point and a familiar reference for committees
Risk paritySets weights so each holding contributes equally to portfolio riskWhen return forecasts are not trusted
Tail-risk optimisationMinimises modified VaR or CVaR instead of volatilityPortfolios with hedge funds, where extreme losses matter most
Black-LittermanBlends market-implied returns with your own viewsWhen the committee holds explicit views on strategies

Constraints, Stress Tests and What-If Analysis

Mandate Constraints
Minimum and maximum weights by fund, strategy and asset class
Efficient Frontier
See the full range of optimal portfolios, not a single answer
Stress Testing
Replay historical crises and test hypothetical scenarios
Monte Carlo Simulation
Model the range of outcomes over your investment horizon
Risk Budgeting
See how much risk each manager and factor contributes
What-If Analysis
Add or remove a fund and see the effect on risk and drawdown

How the Process Runs in AlternativeSoft

  1. Bring in the data: Fund returns arrive from providers such as Bloomberg, Morningstar, Refinitiv and HFR, plus your own files.
  2. Define the candidate set: Start from your current holdings and add the funds under consideration.
  3. Set the constraints: Enter mandate limits, liquidity requirements and risk targets.
  4. Run and compare: Optimise under more than one method and compare the resulting portfolios side by side.
  5. Stress the result: Test the proposed portfolio against past crises and your own scenarios.
  6. Report: Generate the committee paper with the frontier, the proposed weights and the risk statistics.

From Optimisation to Ongoing Management

The optimiser is not a separate tool. The same platform tracks returns, exposures and risk once the portfolio is live, so the committee can see how the portfolio it approved is behaving against the one that was modelled.

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150+
Institutional Clients
Worldwide
$1.5tn+
AuM Managed by
Our Clients
500k+
Funds in Our
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20+
Years of Excellence
Since 2005
Client Testimonials

Trusted by 150+ Leading Institutions

“

AlternativeSoft streamlines many useful performance-based analytics including portfolio optimisation, peer evaluation, and relative analyses. An intuitive platform that is additive to our processes.

Aberdeen Asset Management
Head of Risk Management
★★★★★
“

A practical and user-friendly tool used as part of our portfolio construction and risk management process. Their extensive support and responsiveness provides real added value.

AllianceBernstein
Co-head, Risk Management & Portfolio Construction
★★★★★
“

From statistical analysis on a single hedge fund to portfolio construction, risk analysis and stress testing - one of the most effective and intuitive tools I have handled.

BNP Paribas
Hedge Fund Solutions
★★★★★
Best Risk Management Software
Hedgeweek - 4 Consecutive Years
Best Portfolio Analytics Platform
HFM European Awards
10+ Industry Awards
Recognised since 2005
ISO & GDPR Compliant
Enterprise-grade Security
FAQ

Frequently Asked Questions

It is software that calculates portfolio weights to meet an objective, such as the highest return for a given level of risk, within the constraints of a mandate. AlternativeSoft does this for portfolios of hedge funds, mutual funds and private market funds.
AlternativeSoft supports mean-variance optimisation, risk parity, tail-risk optimisation using modified VaR and CVaR, and Black-Litterman, with user-defined constraints.
Hedge fund returns are often skewed with fat tails. Mean-variance optimisation measures risk as volatility only, so it can understate the chance of large losses. Tail-risk measures such as modified VaR and CVaR address this.
Yes. AlternativeSoft includes stress testing against historical and hypothetical scenarios, as well as Monte Carlo simulation, so a proposed portfolio can be tested before it goes to the committee.
AlternativeSoft connects to providers including Bloomberg, Morningstar, Refinitiv, HFR and Preqin, as well as Excel files and SQL databases, so the optimiser works on one consistent data set.
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in Action

Join 150+ institutional investors who rely on AlternativeSoft to select and monitor funds. Book a personalised demo with our team today.

  • Live walkthrough of the full platform
  • Tailored to your asset class - hedge funds, mutual funds or private markets
  • Q&A with our investment analytics specialists
  • Free trial access available following the demo
  • Dedicated onboarding and implementation support
Hedgeweek Best Risk Management Software: voted by clients 4 years running
Data integrations include:
BloombergeVestmentMorningstarPreqinPitchbookHFR

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