Time lags in fund of funds
Time lags in fund of fundsNet asset value (NAV) of funds of funds (FoF) is based on the underlying funds NAVs. Due to the time of publication of the underlying funds NAVs as well as the underlying funds relating to different markets with different closing times, the NVA of FoF includes time lags and is therefore producing some noise. This noise makes it difficult to correctly estimate tracking error (TE). To minimize the impact of time lags, the authors suggest a measure to adjust the TE considering the problem of non-synchronous data. The paper constitutes an appropriate reading for risk managers as well as for investors needing to compare risk relevant factors using TE (i.e. information ratio) of funds of funds.
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posted by Victor Lloyd Smith @ 11:48 AM
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