By Lars Jaeger
There s a buzzword that has fast captured the mind's eye of product companies and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund concepts potential replicating their go back assets and corresponding threat exposures. although, there nonetheless lacks a coherent photo on what hedge fund replication capability in perform, what its premises are, the way to distinguish di erent techniques, and the place this may lead us to.
Serving as a instruction manual for replicating the returns of hedge cash at significantly cheaper price, replacement Beta suggestions and Hedge Fund Replication offers a distinct specialise in replication, explaining alongside the best way the go back resources of hedge cash, and their systematic hazards, that make replication attainable. It explains the historical past to the recent dialogue on hedge fund replication and the way to derive the returns of many hedge fund recommendations at a lot cheaper price, it differentiates a number of the underlying ways and explains how hedge fund replication can increase your personal funding method into hedge cash.
Written through the well-known Hedge Fund specialist and writer Lars Jaeger, the publication is split into 3 sections: Hedge Fund history, go back assets, and Replication ideas. part one offers a quick direction in what hedge money truly are and the way they function, arming the reader with the historical past wisdom required for the remainder of the publication. part illuminates the assets from which hedge money derive their returns and indicates that most of hedge fund returns derive from systematic probability publicity instead of supervisor "Alpha". part 3 offers a number of methods to replicating hedge fund returns by way of offering the 1st and moment new release of hedge fund replication items, issues out the pitfalls and strengths of a number of the methods and illustrates the mathematical strategies that underlie them.
With hedge fund replication going mainstream, this ebook offers transparent tips at the subject to maximize returns.
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Extra resources for Alternative Beta Strategies and Hedge Fund Replication
And even more recently, several institutions have announced their intention to launch so-called ‘passive hedge fund products’ or, as they have more recently been referred to, ‘hedge fund clones’. 38 This trend is the main topic of this book and will be discussed extensively in the following chapters. Today hedge funds are a fast-growing, multi-billion-dollar industry. e. 2007/2008) $2000–2500 billion invested with approximately 10 000 hedge fund programs worldwide, the vast majority of which are based in the USA and Europe.
And in some cases it is not just difficult to separate alpha from beta, but it is already quite troublesome to distinguish the two (albeit in most cases the exercise of trying to do so itself increases the understanding of a particular hedge fund). 16 The distinction between market inefficiencies and risk premia as a particular source of hedge fund returns is not always as clear as it seems. For now we can live with a rather simple scheme which will become more clear later in the book: if the specific return is available only to a handful of investors and the scheme of extracting it cannot be simply specified by a systematic process, then it is most likely real alpha.
However, this boom died off quickly during the equity bust years in the early 1970s. Around the same time in the late 1960s another ‘original’ hedge fund strategy emerged – ‘Global Macro’. The Global Macro strategy entails taking sophisticated bets on probable future price moves with a much smaller element of ‘hedging’. Global Macro managers take their (rather concentrated and often leveraged) positions in individual securities or markets largely according to their own macroeconomic judgment. a.