Answer: increase in the Sortino ratio for the total portfolio.

## Explanation Adding a 20% hedge fund allocation would most likely result in an **increase in the Sortino ratio** because: - **Hedge funds** typically aim to provide absolute returns with lower downside risk compared to traditional assets. - **Sortino ratio** measures risk-adjusted returns focusing only on downside deviation, which aligns well with hedge fund objectives. - Hedge funds often use strategies that limit losses during market downturns, thereby improving the portfolio's downside protection and increasing the Sortino ratio. - While standard deviation might increase or decrease depending on the hedge fund strategy, the Sortino ratio improvement is a more consistent benefit due to the focus on downside risk management.

Author: LeetQuiz Editorial Team