Guest columnist Andrew Beer re-visits two significant studies on hedge fund replication.
Alternative Beta & Hedge Fund Replication
CREATE-Research's annual report takes a closer look at innovation, and how a lack of has prompted institutional investors to wise up when it comes to alternative investments. We beg to differ.
Hedge Fund Replication: Indexation & duplication? Estimation & approximation? Or a declaration of innovation?Jan 24th, 2011 | Filed under: Academic Research, Alternative Beta & Hedge Fund Replication, Today's Post
Maybe it's about time we dispense with the antiquated notion that "hedge fund replication" is all about actually "replicating" anything.
The ubiquitous Sharpe ratio ignores those pesky "higher moments." But evidently, that's not all it lacks.
In a paper last spring, Wharton Professor Christopher Geczy reviewed the research and concluded the hedge fund industry does indeed have a future - a future that just may not look much like its past or present.
A new white paper by Credit Suisse Asset Management suggests liquid alternative beta will soon be as common an investing concept as index-linked investments in the long-only space.
A 2010 update of a 2006 study on hedge fund alpha shows some interesting changes resulting from the financial crisis.
A new paper tries to make an "extension" of the so-called "Kat-Palaro" model of hedge fund replication. According to its authors, it would have worked way better in 2008 (at least for replicating a CTA index).
By: Andrew Saunders, Member of the Editorial Board of AllAboutAlpha.com, & Director, EFX Prime Services In January the Wall Street Journal reported that ETF assets had crested $1 trillion. No longer is it simply another way to capture S&P 500 beta. It seems that every day there is an innovative new investment idea that is packaged [...]
As investors reflect on last year, they are apparently of two minds regarding hedge funds.
If a monkey hitting keys on a typewriter at random can eventually reproduce Shakespeare's works, can an ETF loosely based on a hedge fund strategy eventually replace a hedge fund manager, and the fees he or she charges?
During its recent hiatus from the front pages, hedge fund replication may have actually proven its mettle.
At least one hedge fund "replicator" has recently been replicating the aspirations, if not the actual experiences of hedge fund managers.
Hedge fund replication is now put to a different use by researchers. Call it "assisted hedge fund replication".
It wasn't long ago that investors were graduating from simple investable hedge fund indices to more sophisticated hedge fund replication products for their passive hedge fund exposure. Now, it seems that "simple" is back as some investors are willing to stomach the high hedge fund fees in exchange for transparency and liquidity.
After being labeled "faddish" and "silly" and being derided as a waste of time last year, short extension and hedge fund replication strategies returned to the news cycle this week.
Newly-release government UFO files aren't the only controversy pitting skeptics against "believers" these days...
Hedge fund replication using factor models is a balancing act between using so many factors that the model doesn't hold up in the future, and using so few factors that the model doesn't hold up at all.
Thought leaders in the hedge fund community remained ensconced at the Princeton Club of New York today as they continued to debate the future of their industry.
Hedge funds from the US and Europe met in New York today to discuss ways to discuss "hedge fund replication". Now that shorting financials has been banned, will "replication" be closest thing we'll see to actual hedge funds for the next while?
Apparently, hedge fund replication products have banded together with other such "hedge fund clones" under the banner "Pax Clonizatus".
Apparently not content to just clone hedge funds, State Street has now turned its sites to cloning private equity funds.
After launching a "hedge fund replication" index last year, Goldman has now built a mutual fund around it. So whither "long-only replication"?
Experts ranging from LBS's Narayan Naik to Stanford's Myron Scholes weighed-in on everything from organizational silos to economic first aid in London today.
In another big win for emerging alpha-centric strategies, part of Sweden's national pension has bought into "hedge fund replication". What's really behind the decision?
State Street's recent win of a $200 million hedge fund replication mandate is notable both due to its size and due to its intellectual inspiration.
Here is a sample of the news stories we didn’t get a chance to explore in detail this week. As usual, all of them can be found on the Alpha-ticker above or in the news items section of AllAboutAlpha.com (free registration may be required for a few of these). Morgan Stanley says Alpha/Beta Separation “the way [...]
Our intrepid "fly on the wall" buzzed into London for a major conference on hedge fund replication. He reports from his fly-sized Blackberry.
Dr. William Shadwick, developer of the Omega Function used in risk management, warns that "over-modeling" has "negative consequences"
In the latest in their ongoing debate, Harry Kat questions Lars Jaeger's reliance on modern finance - a field he calls "utterly disappointing".