http://allaboutalpha.com/blog/2009/03/18/pendulum-swinging-back-to-investable-hedge-fund-indices-for-passive-hf-exposure/ Hedge funds, portable alpha, 130/30 and alpha-centric investing Fri, 19 Mar 2010 07:52:26 +0000 http://wordpress.org/?v=abc hourly 1 http://allaboutalpha.com/blog/2009/03/18/pendulum-swinging-back-to-investable-hedge-fund-indices-for-passive-hf-exposure/comment-page-1/#comment-153643 bill Thu, 19 Mar 2009 20:29:01 +0000 http://allaboutalpha.com/blog/?p=4358#comment-153643 strictly speaking, a passive investment in hedge funds can deliver positive alpha. this just means that hedge funds as an asset class are delivering average positive alpha, and other active investors are delivering average negative alpha. alpha still sums to zero. strictly speaking, a passive investment in hedge funds can deliver positive alpha. this just means that hedge funds as an asset class are delivering average positive alpha, and other active investors are delivering average negative alpha. alpha still sums to zero.

]]> http://allaboutalpha.com/blog/2009/03/18/pendulum-swinging-back-to-investable-hedge-fund-indices-for-passive-hf-exposure/comment-page-1/#comment-153640 Harry M. Kat Thu, 19 Mar 2009 18:42:50 +0000 http://allaboutalpha.com/blog/?p=4358#comment-153640 The two graphs also show that DB ARB is more volatile than the ETF, which explains why it lost more. In fact, wasn't that higher volatility the big con behind DB ARB? Remember their marketing slogan: "We replicate gross returns". As if you can do that without taking more risk. After 14 months of crisis (great job Mr. Paulson!) it is quite amazing to find investors still interested in traditional hedge fund replication. Haven't they figured out by now that hedge fund indices just aren't worth replicating? And even if, you don't need a complex algorithm for that. Put the bulk of your money in T-bills, aind invest the rest in the S&P and a little CDS and hoopla. Replicated. Complex? Not at all. Try building a space shuttle. Now that is complicated. The two graphs also show that DB ARB is more volatile than the ETF, which explains why it lost more. In fact, wasn’t that higher volatility the big con behind DB ARB? Remember their marketing slogan: “We replicate gross returns”. As if you can do that without taking more risk. After 14 months of crisis (great job Mr. Paulson!) it is quite amazing to find investors still interested in traditional hedge fund replication. Haven’t they figured out by now that hedge fund indices just aren’t worth replicating? And even if, you don’t need a complex algorithm for that. Put the bulk of your money in T-bills, aind invest the rest in the S&P and a little CDS and hoopla. Replicated. Complex? Not at all. Try building a space shuttle. Now that is complicated.

]]>