ETFs and Hedge Funds: Separated at Birth
Nov 9th, 2006 | Filed under: Portable Alpha & Alpha/Beta Separation, Retail InvestingWhen mutual funds can be cloned using a combination of ETFs and hedge funds, it’s no surprise that both sectors seem to be growing in tandem.
Experts have been trying to reconcile these seemingly contradictory trends. Are we giving up on active management or embracing it? Do we want boutique alpha generators or do we want a commoditized solution?
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
[…] ETFs and Hedge Funds: Separated at Birth When mutual funds can be cloned using a combination of ETFs and hedge funds, it’s no surprise that both sectors seem to be growing in tandem.? ?Experts have been trying to reconcile these seemingly contradictory trends.? Are we giving up on active management or embracing it?Do we want boutique alpha generators or do we want [.] (more) […]
[…] In any case, we wonder if Brown and de Figueiredo are AllAboutAlpha regulars. Because if they’re not, they should be. Their observation about twin trends of ETFs and hedge funds aligns very closely with our view.   “As the asset management industry has evolved, investors increasingly have been able to access beta exposure inexpensively and easilyâ€through the development of low-cost index tracking funds, ETFs and derivatives. It is not surprising that hedge fundsâ€which provide investors with a purer form of alphaâ€have rapidly expanded at the same time. Investors now can choose alpha and beta separately and can mix and match to their precise specifications.” […]
[…] As regular readers will know, we believe that unbundling active and passive management leads to greater fee transparency, more flexibility and ultimately more tailored portfolios. While this trend may not be immediately apparent in the day to day decisions made by advisers and investors, it reveals itself in the twin growth trajectories of ETFs and hedge funds (see related posting). ETFs, after all, are the cheapest way for an individual investor to buy pure beta and hedge funds - believe it or not - are often a cheaper way to buy active management than purchasing it embedded in mutual funds. […]