Hedge fund project for risk lover

You are working in a wealth management firm and you are required to provide the best investments for two of your clients. Each client has a different risk tolerance level.
First, identify the needs of two different types of clients and develop an Investment Policy Statement (IPS) for each.
You are required to select two of the best hedge fund indices that can meet the investment objectives of these clients. The two hedge funds will be combined in an appropriate mix in order to provide an optimal portfolio for each

of your clients.
Show how each investment you have created for your clients has performed in practice over a retrospective time period.
For performance measurement purposes assume the portfolio was originally constructed on 2nd January 2014. You will then assess the monthly performance of your portfolios in April 2014 and recommend some minor

modifications (asset allocation decision). Finally mark the performance of the revised portfolios in August 2014.

The task will be managed as outlined below:
a) Provide a clear and complete statement of the investment objectives and policies (an IPS) for your actively managed portfolio.
(15 marks)
b) Review all markets and by utilising a clear audit trail justify the selection of your hedge fund indices as investment candidates. Use journal articles to source out contemporary selection methodologies. Databases (Datastream

or Bloomberg) need to be used to gather data-sets on individual funds. Determine accurately, the statistical information you will need for section c). (25 marks)
c) Critically describe the underlying portfolio theory and methodology of the portfolio construction process. (15 marks)
d) Using an appropriate benchmark, appraise the performance of this fund in an interim time period (after it was constructed in January 2014) and suggest any revisions or any modifications to the portfolio that may be required