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Wednesday, January 27, 2010
Are Hedge Funds Really Non-Correlated?
In this segment of Preserve Your Wealth I comment on the downgrade of Japan's debt by S&P as a warning sign that real economic reform is expected by global investors, but caution that 90% of Japan's debt is held in domestic, private hands and a dramatic impact of this downgrade is unlikely.I also make the point that when investors are looking for true, zero-correlated assets, they should look to life policies before hedge funds. True zero-correlation can only be found in assets with no positive or negative correlation to asset classes, whereas a hedge is typically structured to have negative correlation, i.e. to have an exact, inverse payoff-profile to the asset or risk we wish to hedge.
Zero correlation smooths returns and adds an element of certainty in an otherwise highly uncertain world.
posted by Charles Monat Associates at 2:18 PM | 0 comments
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