Hedge fund clones calling in reinforcements for “attack” on funds of funds
| Jul 21st, 2008 | Filed under: Alternative Beta & Hedge Fund Replication | By: Alpha Male |
It used to be that the term “hedge fund clones” referred exclusively to so-called “hedge fund replication” (a.k.a. “alternative beta) strategies. We noted in December 2006 that the term was already well worn.
But now Man Investments has borrowed the term to describe not just alternative beta strategies, but also other emerging strategies such as 130/30, investible hedge fund indices and “permanent capital” (exchange-listed shares in hedge funds). What’s the common link? They amount to what Man calls “hedge fund alternatives” that address the barriers of “high fees and comparatively poor liquidity” that prevent many institutions from investing in hedge fund strategies.
In a report issued this month called, “Attack of the ‘hedge fund’ clones: Investable indices, Alternative beta, 130/30, Permanent capital“, Man ties together these loosely related concepts into one framework that is similar in its intent to this 2007 article, but with a lot more detail.
As a result, this white paper is a great overview of alpha-centric investing that is succinct and easy to read – especially if you like smiley face icons… More…
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Our studies show that the vast majority of diversified FoHF returns can be attributed to alternative beta.
So the real challenge for FoHF (and the opportunity for alternative beta) is to justify the high aggregate fees they charge for the alternative beta portion of their returns.