Alternative Risk Premia

Over the last fifteen years, correlations between hedge fund returns and those of traditional asset classes have increased dramatically, therefore reducing the diversification benefits of many hedge fund strategies in an investment portfolio. One explanation for this increase in correlations is that the alpha capacity is limited thus forcing hedge funds to build exposure to traditional market risk.

Alternative Risk Premia are an attractive alternative to alpha, offering a new way of extracting systematic sources of return, which are uncorrelated with traditional asset classes. The large number of strategies available and the low correlation among their returns make them a powerful investment tool. Furthermore, they can be found in liquid markets, are based on sound economic theories and are often well documented in academic research.

FVC has developed a wide range of strategies across all major asset classes, which are based on some of the best-researched Alternative Risk Premia. FVC believes that fundamental research in the area of Alternative Risk Premia offers valuable insights into how financial markets work. These insights allow FVC to adapt quickly to a changing market environment and develop new strategies, which will further increase the diversification benefits of its portfolios.