Alternative Strategies
QMS Advisors has made increasing use of non-traditional investment portfolios such as hedge funds and other absolute return strategies. These strategies give investors remarkably flexible tools in terms of complementing an existing asset allocation program of traditional stock and bond portfolios. Introducing strategies that are not significantly correlated to the markets allows investors a significant degree of diversification, and ultimately, risk reduction.
QMS Advisors has the ability to deliver customized solutions based on superior qualitative research and unrivalled quantitative frameworks for on-going product design and risk management. Together these capabilities offer our clients the potential for superior rates of return with compelling diversification and risk characteristics. We work with funds of hedge funds as well as direct, single manager investments to deliver a combined portfolio that can meet our clients' unique objectives while offering significant cost savings relative to using only funds of funds.
Overview of QMS Advisors process
QMS Advisors’ process involves screening hedge fund strategies and managers to isolate the most potent sources of stable alpha and of potential for total portfolio diversification. Our due diligence process is both complex and exhaustive; covering a number of key parameters:
Secondary aspects of our due diligence process cover the following areas:



Overall, our approach aims at the following:

  • Seek alpha managers with little or no beta exposure:
    • Evaluate each strategy’s potential exposure to systematic risks and across market cycles
    • Include all explicit and implicit costs inherent in alpha extraction
  • Analyze interactions among alpha managers:
    • Define the origin of returns and risk for each source of alpha
    • Identify risk and return relationships in different market cycles
  • Allocate active risk across uncorrelated sources of return for optimal diversification:
    • The less dependent or correlated the assets, the more the potential gains from diversification.
    • Addition of uncorrelated assets results in a reduction of portfolio-level volatility, thus enhancing risk-adjusted returns


Portfolio Design

QMS Advisors focuses on constructing robust, profitable portfolio of hedge funds. That requires not only an ability to assess individual hedge funds but also a complete understanding of the nature of the risks each takes and, critically, how those risks combine. We assist clients when they are ready to build their own portfolio of hedge funds by making our experience and our tools available to them.

QMS Advisors’ services are tailored to our clients’ demand, and our unequalled expertise in alternative investments can be drawn upon in any which way that our clients see fit; from the implementation of quantitative analysis, to finding solutions to enhance total portfolio diversification, to understanding and disaggregating complex strategies (i.e. derivatives based strategies, hybrids, etc…), to conducting solid due diligence.

QMS Advisors utilizes a battery of quantitative tools to isolate the most potent sources of stable alpha and potential for total portfolio diversification:


QMS Advisors utilizes a battery of approaches, such as clustering techniques to group absolute return strategies so as to help us reveal the main sources of diversification. Non-linear co-dependence techniques to build robust portfolios of uncorrelated alternative investments are also part of our process, as correlation estimates often are ill-adapted in constructing portfolios of alternative assets, as absolute return strategies’ co-dependence structures are non-linear in nature, as exemplified in the following chart:
Studying the contemporary innovations of a set of representative hedge fund indices to a traditional 60% equity, 40% Fixed Income portfolio, we observe the following:
    • Only systematically downward sloping strategies offer negative correlations to traditional 60/40 portfolios.
    • Some strategies display significant tail dependencies with traditional assets such as Emerging Markets and Long/Short Equity hedge funds. QMS Advisors accounts for the simultaneity of extreme values, or tail dependencies of these strategies. We help our clients mitigate the risks associated with these strategies’ non-Gaussian behaviors and unstable correlations by utilizing advanced methodologies such as Copulas in our simulation frameworks.
    • QMS Advisors integrates alternative assets’ co-cyclicality and shifts in correlations over time to derive consistently optimal portfolios through time, as hedge fund strategies evolve. QMS Advisors is able to identify those shifts and to accordingly reallocate to then optimal solutions
QMS Advisors’ service is suitable for any professional investor who wants to have a hedge fund expert backing them.
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