L’habitant: “Majority of hedge funds selling beta at the price of alpha”
Apr 17th, 2007 | Filed under: Alternative Beta & Hedge Fund ReplicationFrancois-Serge L’habitant is one of the big names in the hedge fund research field. He literally wrote the book - or at least a book - on hedge funds. His latest book “Handbook of Hedge Funds” was released in February and Edhec Business School just published this brief interview in which L’habitant discusses hedge fund replication.
Based on what L’habitant has to say about hedge funds, “Handbook of Hedge Funds” must be a pretty short book. He tells Edhec that the majority of hedge funds can be easily replicated using passive factors and that, as a result, he is “not that interested in them”. (We are left to assume the book is about the small minority of funds in which L’habitant is interested).
“…my view is that if a fund is replicable ex-ante month after month by a simple ‘automated’ strategy, then I am not interested in this fund – its manager is essentially selling beta at the price of alpha. Note that this is probably the case of the majority of hedge funds and hedge fund indices today, so why not replicate them”
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