NO.PZ2023010407000004
问题如下：
Snohomish Mukilteo is a portfolio analyst for the Puyallup-Wenatchee Pension Fund (PWPF). PWPF’s investment committee (IC) asks Mukilteo to research adding hedge funds to the PWPF portfolio.
The IC member also informs Mukilteo that for equity-related strategies, the IC considers low volatility to be more important than negative correlation.
Based on what the IC considers important for equity-related strategies, which strategy should Mukilteo most likely avoid?
选项：
A.
Long/short equity
B.
Equity market neutral
C.
Dedicated short selling and short biased
解释：
C is correct. Forequity-related strategies, the IC considers low volatility to be more importantthan negative correlation. Dedicated short selling and short-biased strategieshave return goals that are typically less than those for most other hedge fundstrategies but with a negative correlation benefit. In addition, they are morevolatile than a typical long/short equity hedge fund because of their shortbeta exposure. As a result, Mukilteo should avoid dedicated short selling andshort-biased strategies.
A is incorrectbecause long/short equity is a lower-volatility strategy. A long/short equitymanager aims to achieve a standard deviation that is 50% lower than a long-onlyapproach while achieving average annual returns roughly equivalent to along-only approach. Since the IC considers low volatility important, this isnot a strategy that Mukilteo should necessarily avoid.
B is incorrectbecause equity market-neutral strategies generally have high levels ofdiversification and lower standard deviations of returns than many otherstrategies across normal market conditions. Because they typically deliverreturns that are steadier and less volatile than those of many other hedgestrategy areas, equity market-neutral managers generally are more useful forportfolio allocation during periods of non-trending or declining markets.Equity market-neutral managers neutralize market risk by constructing theirportfolios such that the expected portfolio beta is approximately equal tozero. Over time, their conservative and constrained approach typically resultsin less volatile overall returns than those of managers who accept betaexposure. (The exception to this norm is when the use of significant leveragemay cause forced portfolio downsizing.) Since the IC considers low volatilityimportant, this is not a strategy that Mukilteo should necessarily avoid.
( The exception to this norm is when the use of significant leverage may cause forced portfolio downsizing .)
