Sun, May 20, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Alternative Market Briefing

Consultants argue that hedge fund replicators lag indexes, hedge funds in performance

Thursday, June 27, 2013

Bailey McCann, Opalesque New York: A new report from investment consultants Hewitt Ennis Knupp shows that hedge fund replicators, which are growing in popularity with some investors still lag the real thing in terms of performance. Some liquid alternatives on the market today, seek to replicate the returns of true absolute return funds but with liquid approaches that fit into mutual fund requirements. However, reliance on indexes, and a high correlation to the equities markets can cause these products to underperform compared to the indexes they track or actual hedge funds.

According to the firm, hedge fund replicators focus on trying to recreate certain factors of hedge fund performance, removing the focus from capturing alpha and managerial skill. The report notes that the most common replication process is to try to capture the broad moves of the "hedge fund universe" through indexes. They say that over time, you may be able to capture much of the same returns as the index, but because the replicator is looking at a universe of funds instead of a given fund or strategy, it won't be nimble enough to react in the same way a hedge fund manager would to shifts in the market.

"The replication strategy is always playing catch up, as it is based on historical data. It can also be relatively sluggish, as most products are only rebalanced monthly. Hence strategies with a high turnover, and mid-month inflection points in markets will be very difficult to replicate," au......................

To view our full article Click here

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. News Briefs - Warren Buffett: Target date funds aren't the way to go, Cambridge Analytica could be reborn under a different name[more]

    Warren Buffett: Target date funds aren't the way to go Planning for retirement can be complicated and stressful. This is why target date funds - funds that are managed based on when you expect to retire - are so attractive. Over time, the balance of stocks, bonds and cash evolve automati

  2. Investing - Hedge funds hike Smurfit Kappa positions amid takeover deal hopes, Hedge fund IBV Capital digs deep to unlock long-term value in a competitive market, Eisman of 'The Big Short' fame recommends shorting Deutsche Bank[more]

    Hedge funds hike Smurfit Kappa positions amid takeover deal hopes From Irishtimes.com: Two US hedge funds, Davidson Kempner and York Capital, have accumulated a combined 4.74 per cent interest in cardboard box maker Smurfit Kappa using financial derivatives. It comes as many investors cl

  3. Foundations of hedge fund managers gave big to controversial donor-advised funds[more]

    In the world of philanthropy and tax-deductible charitable giving, the explosion of donor-advised funds has touched off intense debate. Now, there is evidence that the DAF boom is being further fuelled by hedge fund foundation money. Four of the top five foundations that gave the most to large do

  4. Study: For hedge funds, smaller is better[more]

    From Institutionalinvestor.com: The smaller the hedge fund is, the better its performance is likely to be, according to a new study. The study - "Size, Age, and the Performance Life Cycle of Hedge Funds," released April 26 - sought to determine whether a hedge fund's size and age had any effect on i

  5. Hedge fund returns rose in April for first gain since January[more]

    From Bloomberg.com: Bloomberg Hedge Fund Database shows returns flat this year - Currency strategies had the biggest monthly gain at 13% Hedge fund returns increased 0.78 percent in April, reversing two consecutive monthly declines. The swing of 134 basis points was driven by gains in all seven