benefits and risks of alternative investment strategies.pdfVIP

Benefits and Risks of Alternative Investment Strategies* Noël Amenc Professor of Finance at Edhec Director of Research and Development, Misys Asset Management Systems Lionel Martellini Assistant Professor of Finance at the Marshall School of Business, USC Los Angeles Mathieu Vaissié Research Engineer with Edhec October 10th 2002 (*) This article benefited from the proofreading of Dominique Blanc, Jean-François Boulier, Dominique Forget, Bernard Bechetoille, Jean-Yves Gourin, Philippe Malaise, Nicolas Rousselet, Jean-René Giraud, Jean-Yves Foucat, Axel Weytens, Gautier Henry and Sébastien Bonnet. We would like to thank them for their very valuable advice. All errors or omissions are, of course, the sole responsibility of the authors. Benefits and Risks of Alternative Investment Strategies* Introduction The growth of alternative investment has been considerable in recent years. For both institutional and private investors, it seems that alternative investment now constitutes a distinct class within their overall asset allocation. A recent survey of institutional investors carried out by Goldman Sachs and Frank Russell1 revealed that the respondents invested more than 1.7% of their assets in hedge funds in 2001 and plan to increase the investment to 3.4% for 2003. More generally, the year 2001 represented a record year for investments in hedge funds, bringing together more than 30 billion dollars. In Europe, the alternative investment industry experienced a growth rate of 60% in 2000 and 40% in 2001 and the major asse