HEDGE FUNDS AS RETIREMENT INVESTMENTS
HEDGE FUNDS AS RETIREMENT INVESTMENTS

Author(s): Izabela Pruchnicka-Grabias
Subject(s): Methodology and research technology, Financial Markets, Socio-Economic Research
Published by: Sveučilište Josipa Jurja Strossmayera u Osijeku, Ekonomski fakultet u Osijeku
Keywords: hedge funds; Hurst exponent; rates of return persistence;
Summary/Abstract: Low and negative interest rates encourage investors to look for new ways of saving money for their retirement period. They seek some alternative investments. One type of these are hedge funds. The author analyzes return rates generated by hedge funds, and funds of hedge funds form the point of view. The research is conducted with the Hurst exponent, which is also applied in scientific disciplines like science and nature. The paper proves that the probability of return persistence rates decreases with the extension of the time horizon. It suggests that long-term investments in hedge funds are linked to high-risk levels. One reason is that regular distribution features do not describe their rates of return. The second is a low probability that their performance in one-year or more extended periods can be repeated. According to such conclusions, retirement portfolio diversification seems to be crucial. To sum up, hedge funds cannot be single assets for the retirement portfolio, but they can be its small part to play a diversifier role.

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