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All of the SkyRank backtests seek to eliminate non-credible, inexperienced hedge funds, and reward funds that prove to exploit market inefficiencies in their respective specializations over significant periods of time.
To create a portfolio with high risk-adjusted returns, highly-SkyRanked funds are chosen in a number of ways, depending on the backtest conditions.
SkyRank is currently in discussions to partner with
select hedge fund entities to utilize SkyRankto
optimize a portfolio of hedge funds.
Please review the following three sample backtest methodologies and results:
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SkyRank20 studies 600 hedge funds and rates all funds monthly, always deleting out future returns. After the ratings are recorded, the next month's data is added in, ratings are recalculated and recorded. This process continues throughout the time period. With this methodology, although some survivor bias exists, there is no return bias.
Each month, an equal amount of capital is allocated to the top 20 SkyRanked hedge funds. Any changes in the top 20 funds result in exchanges from the fund that dropped out of the top 20, and into the fund that now is within the top 20 due to its higher rating.
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>> SkyRank20 Results in PDF Format
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The SkyRankHypoEuro Backtest
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SkyRankHypoEuro is a hypothetical index of 20 randomly-selected euro-denominated hedge funds from the AAC database. The 20 hedge funds were first tested to see what an equally-allocated portfolio would return, independent of the SkyRank System. The equally-weighted portfolio was then optimized with SkyRank. Each month, the 20 hedge funds were rated, independent of future returns.
The following allocation methodology was implemented each month, independent of returns, positive or negative, of the funds; the only trigger used was the quantitative Absolute SkyRank:
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- The top SkyRanked quartile of the 20 hedge funds (funds 1-5) was allocated $4 million.
- The 2nd quartile of SkyRanked funds (funds 6-10) was allocated $3 million.
- The 3rd quartile of SkyRanked funds (funds 11-15) was allocated $2 million.
- The 4th quartile of SkyRanked funds (funds 16-20) was allocated $1 million.
The returns, volatility and Sharpe Ratio of the equal-weighted portfolio were then compared to the SkyRank Enhanced Portfolio.
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>> SkyRankHypoEuro Results in PDF Format
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