New Tool Uses Monte Carlo Simulations to Evaluate Managers

SAN CLEMENTE, Calif. (HedgeWorld.com)–PPCA Inc. unveiled a version of its Portfolio Opportunity Distribution evaluation software that can be used to evaluate long/short equity and short-biased equity managers.

Called HedgePOD, PPCA adapted a statistical approach it already used on long-only equity managers for use with short selling managers as well. The idea behind it is to run Monte Carlo simulations that estimate all of the possible investment outcomes available to a manager.

The POD approach runs the simulations using the core investment attributes of an equity manager, such as the number of names in the portfolio long and short, use of leverage, fees and beta, creating a normal distribution of possible returns.