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Alternative Market Briefing

Misconceptions about hedge fund replication, Part 1

Thursday, December 12, 2013

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Benedicte Gravrand, Opalesque Geneva:

Hedge fund replication is the collective name given to a number of different methods that attempt to replicate hedge fund returns. With the belief that alpha is a zero-sum gain, more investors are now said to be looking to simply add "hedge fund beta" to their portfolio through replication products.

For example, we heard in August that the Global X Top Guru Holdings Index ETF, a hedge fund replication product, had gathered $114.8 million in 14 months of trading. And the Credit Suisse Liquid Alternative Beta Index is up 6.83% YTD (to end-Nov.)

However, hedge fund replication still remains misunderstood in many quarters.

"I personally invested in a hedge fund replication strategy since May 2007, and that’s actually the longest that any human being has been invested in a strategy," Andrew Beer, CEO of Beachhead, tells Opalesque. "To me, it’s an interesting intellectual exercise because there is so much misunderstanding about what these products are and what they are designed to do."

Beachhead Capital Management, with offices in New York and Lexington, MA, does customized hedge fund replication. The firm can replicate the performance of "high alpha direct hedge funds and funds of hedge funds," according to its presentatio......................

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