Estimando Combinacões de Risco e Retorno para Novos Fundos Derivativos

Active funds are typically managed by placing bets against a welldefined passive bench-mark. In this context, when examining the launching ofa new actively managed fund with a target expected excess rate of returnrelative to the benchmark equal to µ, asset managers face the problem ofestimating the risk σ of excess rates of return. This estimate is criticalto examine whether the product is commercially feasible and to define risklimits for the manager, if the product is launched. This paper proceeds toexamine the solution to this problem assuming an especial form of thebinomial model, in the context of the market timing structure advanced byMerton (1981). The paper shows that two variables are relevant for thesolution of the proposed problem. The first, and the most relevant, is theskill level of the manager. A ore skilled manager is able to operate a lessrisky product with the same target excess rate of return µ. The secondrelevant variable is the trade-off between risk and return determined byexisting investment opportunities in the market. The smaller the increasesin risk exposure required to obtain an increase in excess returns, the lessrisky the product will be After solving the problem under specificassumptions, the paper proceeds to test empirically their validity using arepresentative sample of hedge funds in the Brazilian market. The empiricalresults strongly support the validity of the required assumptions.