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Alternative Market Briefing

Misconceptions about hedge fund replication, Part 2

Friday, December 13, 2013

amb
Adam Patti
Benedicte Gravrand, Opalesque Geneva:

Known variously as hedge fund replication, alternative beta, liquid alternatives, these assets attempt to resolve many of the problems institutional investors experienced in 2008, that is, transparency, liquidity and fidelity, writes Marc Freed in the Journal of Indexes. According to him, the three main analytical approaches to hedge fund replication today are mechanical (which copies actual positions held by hedge funds), distributional (winch infers the exposures of hedge fund portfolios from the statistical properties of time series of their returns), and factor-based (which identifies correlations between hedge fund indexes and conventional investment indexes).

Those approaches make for lively debates, and more than a little confusion among investors and providers. Andrew Beer of Beachhead capital gave his own perspective on where the confusions lie in Part 1 of this article, and two more replication experts talked to Opalesque about the common misconceptions about hedge fund replication; today is Adam Patti of IndexIQ.

The S&P500 of the hedge fund market According to Adam S.......................

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