Optimal construction of a fund of funds

We study the problem of diversifying a given initial capital over a finite number of investment funds that follow different trading strategies. The investment funds operate in a market where a finite number of underlying assets may be traded over finite discrete time. We present a numerical procedure for finding a diversification that is optimal in the sense of a given convex risk measure. The procedure is illustrated on an asset-liability management problem where the liabilities correspond to a pension insurance portfolio.

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