By Lars Jaeger
There s a buzzword that has speedy captured the mind's eye of product services and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund options capability replicating their go back assets and corresponding hazard exposures. notwithstanding, there nonetheless lacks a coherent photograph on what hedge fund replication skill in perform, what its premises are, tips to distinguish di erent ways, and the place this may lead us to.
Serving as a guide for replicating the returns of hedge cash at significantly lower price, Alternative Beta techniques and Hedge Fund Replication presents a distinct specialise in replication, explaining alongside the way in which the go back assets of hedge cash, and their systematic hazards, that make replication attainable. It explains the history to the hot dialogue on hedge fund replication and the way to derive the returns of many hedge fund thoughts at a lot cheaper price, it differentiates a few of the underlying methods and explains how hedge fund replication can increase your personal funding procedure into hedge funds.
Written through the well-known Hedge Fund specialist and writer Lars Jaeger, the booklet is split into 3 sections: Hedge Fund heritage, go back assets, and Replication suggestions. part one presents 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 e-book. part illuminates the resources from which hedge money derive their returns and indicates that almost all of hedge fund returns derive from systematic possibility publicity instead of supervisor "Alpha". part 3 provides numerous techniques to replicating hedge fund returns by means of featuring the 1st and moment iteration of hedge fund replication items, issues out the pitfalls and strengths of many of the methods and illustrates the mathematical suggestions that underlie them.
With hedge fund replication going mainstream, this e-book presents transparent assistance at the subject to maximize returns.
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Additional resources for Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance)
41 The HFR Fund of Funds index shows a standard deviation of around 6% over the period from 1990 to mid-2004. 42 See also the discussion in the article by the author, ‘The trouble with the bubble theory’ (2002). ’, The Economist, September 1 2001, ‘The $500 billion hedge fund folly’, Forbes Magazine, August 6 2001, ‘The hedge fund bubble’ (by Barton Biggs), Financial Times, July 9 2001. 44 One important aspect which is often forgotten in the discussion is that the total level of hedge fund returns carries a direct dependency on the level of risk-free interest rates.
The idea that these strategies were too complex for investors to understand lent a certain mystique and magic to hedge funds. And it discouraged investors from monitoring fund managers too closely. This may have seemed advantageous to managers at one time, but it is now a liability. As hedge funds become more ‘mainstream’ investment vehicles they will 13 W. Fung, D. Hsieh, N. Naik, T. Ramadorai, ‘Hedge funds: performance, risk and capital formation’ (2007). P1: JYS c02 JWBK289-Jaeger 16 August 18, 2008 8:47 Printer: Yet to come Alternative Beta Strategies and Hedge Fund Replication have to move away from the mysterious and secretive ‘magic black box’ image.
Generate attractive returns in challenging market conditions Paradoxically, the massive capital flows to hedge funds occurred in a period where hedge fund managers provided investors with rather disappointing absolute returns. 43 The main reason for this hedge fund underperformance relative to historic returns was clearly the difficult situation in global equity markets in 2000–2003, when despite the claim of market-neutrality, many hedge fund strategies had not been able to escape the downward pull of falling stock markets.
Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance) by Lars Jaeger