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From Benedicte Gravrand, Geneva:
This was a very cerebral last day (organised by IRC Conferences.) Opinions about the clones were divided. Many representatives from academia made important points (and much quipping). Here is a round-up of the talks.
Some impressions I got out of those lectures was that 1) the clones (replicates and alternative beta products), however long they last, will certainly pressurise hedge fund managers into lowering their fees as competition for the big investors sets in, 2) for hedge fund managers, it may be that just comparing performance returns to benchmarks might not be enough to prove alpha. Only the real alpha delivers will survive, as only those will be considered by increasingly sophisticated investors.
An analogy came to mind: hedge fund replicates are to hedge funds what tofu cheese is to regular cheese. Tofu cheese is blend, does not affect your cholesterol levels (lower risk level) and is not very fattening (no big $ returns). Regular cheese, like hedge funds, can be more exotic (comes in many different tastes / strategies), may affect your health (affect your wallet through higher risk levels) and can be very fattening (fat performance returns). However this analogy may not be totally fair for replicates; a lot of very bright people have been studying this new idea for quite some time, and have come up with interesting conclusions, some positive.
Nassim Nicholas Taleb o...................... To view our full article Click here
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