Quantitative investment strategies and portfolio management

  • Jinqiang Guo Jinqiang Guo

A lockup period for hedge funds restricts a multi-period investorís ability to rebalance his portfolio and has non-trivial e§ects on the allocation decision and portfolio e¢ ciency. Investors compensate for a hedge fund lockup period by making adjustments to their equity and bond holdings. Adding hedge funds with a lockup period to the portfolio of stocks and bonds generates large, negative hedge demands for stocks. More importantly, an investor with a portfolio of stocks, bonds and hedge funds under both the unconditional strategy and conditional strategy is hurt by the presence of a hedge fund lockup period. In an unconditional setting, we Önd a Sharpe ratio of 1.10 for the portfolio of stocks, bonds and hedge funds adjusted for stale pricing, with a three-month lockup period for hedge funds and monthly rebalancing of stocks and bonds. For the same portfolio, but without a hedge fund lockup period, we Önd a signiÖcantly higher Sharpe ratio of 1.42. The certainty equivalent is 1.9%, i.e. the investor is willing to pay 1.9% per year in order to move to the ideal situation of unlimited rebalancing or no lockup.

Netspar, Network for Studies on Pensions, Aging and Retirement, is a thinktank and knowledge network. Netspar is dedicated to promoting a wider understanding of the economic and social implications of pensions, aging and retirement in the Netherlands and Europe.


Mission en strategy           •           Network           •           Organisation           •          Magazine
Board Brief            •            Actionplan 2023-2027           •           Researchagenda


Our partners

B20160708_universiteit leiden
BPL_Pensioen_logo+pay-off - 1610-1225 v1.1_grijswaarden
View all partners