Goldman’s new “A.R.T.” HF-Replication-Mutual-Fund
Jun 22nd, 2008 | Filed under: Alternative Beta & Hedge Fund Replication
As we reported in our weekly newsreel on Monday, Goldman Sachs just launched a mutual fund based on its recently-launched hedge fund replication index called the “Absolute Return Tracker” (ART). As the FT reports, the fund aims to highlight how a large proportion of hedge fund returns are just “exotic beta” not true alpha.
“The underlying theory makes sense. Some of hedge funds’ performance is down to alpha, or fund managers’ skill. For that, for now, you will continue to have to pay fees.
But a large amount of it is beta. In other words, it is predictably correlated with various markets. Absolute return managers will tend to cluster around similar asset allocations; it is possible to model this behaviour; and hence it is possible passively to capture a large chunk of the value that absolute return managers deliver, and pay much less for it.”
The nuts and bolts behind “ART” are a state secret, but the fund’s prospectus describes it this way:
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