Hedge funds typically have non-normal return distributions marked by significant positive or negative skewness and high kurtosis. Mean-variance optimization models ignore these higher moments of the return distribution. If a mean-variance optimization model suggests significant allocation to...

Hedge funds typically have non-normal return distributions marked by significant positive or negative skewness and high kurtosis. Mean-variance optimization models ignore these higher moments of the return distribution, and thus fail to convince investors who care about the unwanted skewness and...