Owing in part to its tremendously prolific promotional department, few in the hedge fund industry are unaware that EDHEC Risk and Asset Management Research Centre – an off-shoot of the renowned Edhec Business School in France – is releasing its latest research on hedge fund replication today (Thursday) at a seminar in London.  The paper’s title summarizes Edhec’s take on the state of the replication world today: “The Myths and Limits of Passive Hedge Fund Replication: An Attractive Concept…Still a Work in Progress”.

While the full paper isn’t yet available to the public, our friends at Edhec have provided AllAboutAlpha.com with an copy so we can give you some of the main points. 

Overall, we find it to be a very good survey of the state of the replication field.  In the words of the authors, Noel Amenc, Walter Gehin, Lionel Martellini (Hall of Fame, related posting), and Jean-Christophe Meyfredi:

“The purpose of this position paper is to provide an in-depth analysis of the subject, with an emphasis on the findings based on the last ten years of academic research on hedge fund performance analysis and replication, and a discussion of the implementation challenges related to a commercial offering based on these concepts.”

The paper reaches two broad conclusions:

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