Investment style analysis revolutionizes fund selection for better returns.
The article explains how to analyze mutual funds and hedge funds using return-based style analysis. It emphasizes the importance of choosing the right benchmarks for accurate conclusions. For sector-focused funds like healthcare or technology, sector indexes should be included as benchmarks. By incorporating option-based strategies as benchmarks, the investment style of hedge fund managers can be effectively analyzed. The research shows that return-based style analysis offers unique insights that peer evaluation alone cannot provide.