By Lars Jaeger
There s a buzzword that has quick captured the mind's eye of product companies and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund suggestions capacity replicating their go back resources and corresponding probability exposures. even if, there nonetheless lacks a coherent photograph on what hedge fund replication capability in perform, what its premises are, easy methods 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, Alternative Beta suggestions and Hedge Fund Replication presents a different concentrate on replication, explaining alongside the way in which the go back resources of hedge cash, and their systematic dangers, 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 innovations at a lot cheaper price, it differentiates a few of the underlying ways and explains how hedge fund replication can enhance your personal funding approach into hedge funds.
Written through the well-known Hedge Fund specialist and writer Lars Jaeger, the e-book is split into 3 sections: Hedge Fund historical past, go back assets, and Replication ideas. part one offers a quick path in what hedge money truly are and the way they function, arming the reader with the history wisdom required for the remainder of the e-book. part illuminates the assets from which hedge cash derive their returns and indicates that almost all of hedge fund returns derive from systematic danger publicity instead of supervisor "Alpha". part 3 provides a number of methods to replicating hedge fund returns via providing the 1st and moment new release of hedge fund replication items, issues out the pitfalls and strengths of many of the methods and illustrates the mathematical ideas that underlie them.
With hedge fund replication going mainstream, this e-book presents transparent assistance at the subject to maximize returns.
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Additional info for Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance)
Fourth, increased interest on the part of (comparably risk-averse) institutional investors together with some well-publicized ‘investment accidents’ has led to the recognition that hedge fund risks have to be more systematically addressed. As a result, risk management techniques have become much more sophisticated. The ‘cowboy mentality’ of hedge funds has given way to investment managers who are better and more professional risk managers, and thus more credible in the eyes of the investor. With continued asset growth and compelling and unique risk–return attributes, hedge fund investing appears destined to be recognized as a legitimate element of global asset management.
And, last but not least, the industry must find a fair compensation system that distinguishes between highly paid alpha returns and less costly beta performance. Let us look at each of these challenges in turn and explore ways to meet them. Generate attractive returns in challenging market conditions Paradoxically, the massive capital flows to hedge funds occurred in a period where hedge fund managers provided investors with rather disappointing absolute returns. 43 The main reason for this hedge fund underperformance relative to historic returns was clearly the difficult situation in global equity markets in 2000–2003, when despite the claim of market-neutrality, many hedge fund strategies had not been able to escape the downward pull of falling stock markets.
6 THE HEDGE FUND INDUSTRY TODAY Recent years have seen the continuation of unparalleled growth in hedge funds, in terms of asset inflow as well as number of funds. 3 displays this growth. Ironically the bear equity market period of 2000–2003 as well as occasional periods of market distress in the subsequent bull market from 2003 to 2007 coincided with unprecedented hedge fund underperformance (relative to their historic average, not relative to equity markets). The poor performance of hedge funds during stressful market conditions forces us to critically reassess the notion that ‘hedge funds are uncorrelated to traditional asset classes’.
Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance) by Lars Jaeger