Sample interview questions: How do you evaluate the performance of a hedge fund and its individual investments?
Sample answer:
Evaluating Hedge Fund Performance
- Quantitative Metrics:
- Sharpe Ratio: Assesses risk-adjusted return
- Jensen’s Alpha: Measures excess return over the benchmark
- Treynor Ratio: Adjusts return for systematic risk
- Calmar Ratio: Considers return and drawdown
- Sortino Ratio: Focuses on downside risk
- Qualitative Factors:
- Management Team: Experience, skills, and track record
- Investment Strategy: Alignment with objectives, track record, and risk tolerance
- Risk Management: Controls and processes for managing financial, operational, and reputational risks
- Reporting and Transparency: Level and quality of communication and information provided
- Performance Attribution:
- Contribution Analysis: Identifying the specific investments or strategies that contribute to overall performance
- Risk Decomposition: Understanding the sources of risk and volatility
Evaluating Individual Investments
- Due Diligence:
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Source: https://hireabo.com/job/1_2_10/Hedge%20Fund%20Manager
- Thorough research … Read full answer