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Hedge Funds vs. Alternative Risk Premia

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  • Philippe Jorion

Abstract

Alternative risk premia (ARP) are designed to provide low-cost exposures to long–short risk premia often embedded in hedge fund returns. This article describes the performance of the ARP market in the form of bank-provided total return swaps, which are investable strategies that provide after-cost access to ARP. Over the 2010–20 period, many of these risk premia provided significantly positive returns. In addition, these ARP explain a high fraction of returns on hedge fund indexes, especially for quantitative strategies, along with traditional market factors. Finally, we find that ARP and market factors largely eat away hedge fund index returns.

Suggested Citation

  • Philippe Jorion, 2021. "Hedge Funds vs. Alternative Risk Premia," Financial Analysts Journal, Taylor & Francis Journals, vol. 77(4), pages 65-81, October.
    • Handle: RePEc:taf:ufajxx:v:77:y:2021:i:4:p:65-81
    DOI: 10.1080/0015198X.2021.1960133
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    Cited by:

    1. Tom Arnold & John H. Earl & Joseph Farizo & David North, 2024. "Endowment asset allocations: insights and strategies," Journal of Asset Management, Palgrave Macmillan, vol. 25(4), pages 349-368, July.

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