By Lars Jaeger
There s a buzzword that has fast captured the mind's eye of product services and traders alike: "hedge fund replication". within the broadest experience, replicating hedge fund ideas capability replicating their go back resources and corresponding probability exposures. even though, there nonetheless lacks a coherent photo on what hedge fund replication capacity in perform, what its premises are, tips to distinguish di erent ways, and the place this may lead us to.
Serving as a instruction manual for replicating the returns of hedge money at significantly cheaper price, Alternative Beta ideas and Hedge Fund Replication presents a special specialise in 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 heritage to the hot dialogue on hedge fund replication and the way to derive the returns of many hedge fund ideas at a lot lower price, it differentiates a few of the underlying methods and explains how hedge fund replication can enhance your individual funding strategy into hedge funds.
Written through the well-known Hedge Fund professional and writer Lars Jaeger, the booklet is split into 3 sections: Hedge Fund heritage, go back resources, and Replication thoughts. part one offers a brief 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 booklet. part illuminates the assets from which hedge cash derive their returns and exhibits that almost all of hedge fund returns derive from systematic probability publicity instead of supervisor "Alpha". part 3 offers numerous techniques to replicating hedge fund returns by means of proposing the 1st and moment new release of hedge fund replication items, issues out the pitfalls and strengths of some of the techniques and illustrates the mathematical options that underlie them.
With hedge fund replication going mainstream, this e-book presents transparent information at the subject to maximize returns.
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Extra resources for Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance)
The degree of resistance against disclosure of positions and transactions to independent (and confidential) third parties in the hedge fund industry is surprising insofar as hedge funds are often considered as the outsourced activities of proprietary trading operations of investment banks. Many of today’s hedge fund strategies actually operate very similarly to investment banks’ trading desks which often have been running these strategies for years and decades. 14 One of the fundamental principles of modern risk management is: separate the traders from the risk managers (and compensate the latter independently of the trading P&L).
George Soros is today running his Quantum Endowment Fund in a much different (and more conservative) setting, and Julian Robertson has left the public investment scene. 28 J. Rohrer, ‘The red hot world of Julian Robertson’, Institutional Investors, May 1986, p. 86. 29 An interesting history of hedge funds is presented in T. Caldwell, T. Kirkpatrick, ‘Introduction: the model for superior performance’, in A Primer on Hedge Funds (1995); and in J. Lederman, R. Klein, Hedge Funds: Investment and Portfolio Strategies for the Institutional Investor (1995).
Fifteen years ago investing in emerging markets was marketed as a new way of decreasing overall portfolio risk. Experiences in the 1990s (Mexico, Thailand, Russia, Argentina, Brazil) have aligned the hype with reality. But the hype restarted nevertheless in recent years. The diversification benefits of hedge funds might be overestimated, as the hedge fund industry had a long equity bias in the equity bull markets of the 1990s and 2003–2007. It is not at all clear that hedge funds can isolate themselves from global economic trends in the future, as quite clearly they have not done so in the past.