Absolute Returns Not Always Above Volatility Management In Hedge Fund Allocation Decisions

Is volatility management a key statistic to pay attention to above absolute returns?

When making allocation decisions there is a definite disadvantage to filtering hedge fund performance from the standpoint of highest absolute returns, which is often the criteria for many of the "best" performer lists compiled by brokerage and industry award programs. Sophisticated algorithmic methods to determine hedge fund allocation decisions, however, often don't consider absolute return as the top factor. Some methods are based on a fund’s noncorrelation to several strategic and market factors such as the fund’s upside and downside deviation levels measured as different values, the fund's overall volatility relative to returns profile and the predictability to a market beta to list a few of several considerations. Looking...