Last week, Deutsche Bank joined the hedge fund replication party with its new “DB Absolute Return Beta Index“.  While it is still too early to gauge the success of the offering, the company’s press release contains some hints about the way it will be spinning this latest entry in an increasingly crowded field.

The early spin deserves both laurels and darts.  Deutsche Bank deserves kudos for addressing a common concern about hedge fund replication offerings – that they only attempt to replicate hedge fund returns after fees.  There are those who feel that this might be okay if those suppliers didn’t also attack hedge funds for charging too much.  After a landmark event on hedge fund replication in London last winter, one reader wrote us to express several concerns.  One of those concerns read as follows:

“Just what is being replicated? My understanding…is that (hedge fund replicators) are modeling HF returns net of fees. The utility to the end investor will be the same as if they were paying large fees to a hedge fund manager. The saving on fees does not lead to higher returns to the investor. This has been conveniently overlooked.”

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