Ultrametricity in fund of funds diversification

Minimum market transparency requirements impose hedge fund (HF) managers to use the statement declared strategy in practice. However, each declared strategy may actually generate a multiplicity of implemented management decisions. Is then the "actual" strategy the same as the "announced" strategy? Can the actual strategy be monitored or compared to the actual strategy of HF belonging to the same "announced" class? Can the announced or actual strategy be used as a quantitative argument in the fund of funds policy? With the appropriate metric, it is possible to draw a minimum spanning tree (MST) to emphasize the similarity structure that could be hidden in the raw correlation matrix of HF returns. (C) 2004 Elsevier B.V. All rights reserved.