Alternative Beta Conference Notebook
Feb 12th, 2007 | Filed under: Alternative Beta & Hedge Fund ReplicationART, meet ABI…
Picking up on Goldman Sach’s Absolute Return Tracker and Merrill Lynch’s Equity Volatility Arbitrage Index, JPMorgan is now in the hedge fund replication game.
Their new Alternative Beta Index now adds ABI to ART and “EVAI” in the hedge fund replication lexicon. The product was developed with the help of Duke’s David Hsieh and LBS’s William Fung and Narayan Naik. JPMorgan’s entry in this market addresses the common concerns that many pension fund have with hedge funds: fees, transparency, liquidity (especially in times of distress). Their approach begins with three buckets of hedge fund strategies: equity hedge, fixed income, and global macro/CTA. Then, they map these major categories onto 8 factors that are dynamically traded by the ABI model.
According to Lakshmi Seshadri of JPMorgan, ABI produces higher information ratios than traditional hedge fund indexes and can be efficiently leveraged. As a result, it will be offered in several formats (swaps, notes etc.) and will be launched in early Q2 of this year.
State Street: Factor Modeling Not Just for Cloning
It’s becoming apparent that Alpha Male brings down the average IQ in this conference room. Here’s even more proof: like Lars Jaeger, Chris Woods, Senior MD of Absolute Return Strategies at State Street Global Advisors, is also trained in classical physics.
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