Case Study - Why Hedge Funds?
Investing in the future, diversifying your risks
Masako Watanabe & Associates Limited1105 Printing House, 6 Duddell Street
Central, Hong Kong
www.investmw.comSummer 2006
Masako Watanabe & Associates Limited
Disclaimer
The products introduced herein are not authorized by Hong Kong SFC or any regulatory authorities in other countries.
This presentation is for information purposes only and is not an offer or solicitation to buy or sell securities. The private placement memorandum is the official document for the terms and conditions of the products.
Although the contents herein are based on information believed to be reliable, Masako Watanabe & Associates Limited makes no representation as to its accuracy or completeness.
This document is prepared for private use only and may not be copied, reproduced and passed to any third party without the prior written consent of Masako Watanabe & Associates Limited.
Masako Watanabe & Associates Limited
Managing Your Risk
• All investments carry some element of risk and hedge funds are no different
• However, contrary to their public image as risk-takers most hedge fund managers specifically focus on reducing risk and limiting volatility
• By including carefully chosen, hedge funds with low market correlation and good track record, an investor can significantly increase his portfolio's risk adjusted returns
• The following is a sample presentation on the effect the inclusion of hedge funds’ products can have on a traditional portfolio
Masako Watanabe & Associates Limited
24 %
+ 18 %
+ 16 %
+ 14 %
+ 12 %
+ 10 %
+ 8 %
+ 6 %
+ 4 %
4 % 6 % 8 % 10 % 12 % 14 % 16 % 18 % 20% 22 %
Volatility (Risk) ( % )
Per
form
ance
(%
)Portfolio Theory in praxisDec 1990 – June 2006
Portfolio 2 60 % MSCI, 40% Sample Hedge Fund
Portfolio 1100% MSCI (stocks only)
High risk/return Hedge Fund
Masako Watanabe & Associates Limited
Volatility 13.4%
Volatility 13.4%
Comparison 10.000 USD Invested Dec 1990 – June 2006
Portfolio 1100 % MSCI (stocks only)
Portfolio 1100 % MSCI (stocks only)
39,940 USD
Volatility 6.5%
Volatility 6.5%
28,780 USD
Portfolio 3 100% Govt. Bond Index
Portfolio 3 100% Govt. Bond Index
RiskRisk10,000 USD10,000 USD RiskRisk10,000 USD10,000 USD
Sharpe ratio* 0.36
Sharpe ratio* 0.32
*mo
difi
ed
sh
arp
ra
tio (
risk
fre
e =
5%
)
Volatility 9.9%
Volatility 9.9%
70,080 USD
Portfolio 260 % MSCI +
40 % Hedge Fund
Portfolio 260 % MSCI +
40 % Hedge Fund
RiskRisk10,000 USD10,000 USD
Sharpe ratio* 0.91
Masako Watanabe & Associates Limited
Conclusion
• Diversify your portfolio by adding hedge fund products to: Reduce risk Increase returns A more balanced portfolio
• Interested to learn more? Contact us now!
• And never forget…
Masako Watanabe & Associates Limited
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