By Lars Jaeger
There s a buzzword that has speedy captured the mind's eye of product prone and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund innovations ability replicating their go back assets and corresponding threat exposures. notwithstanding, there nonetheless lacks a coherent photo on what hedge fund replication capability in perform, what its premises are, tips to distinguish di erent methods, and the place this may lead us to.
Serving as a instruction manual for replicating the returns of hedge cash at significantly cheaper price, substitute Beta suggestions and Hedge Fund Replication presents a different specialize in replication, explaining alongside the best way the go back resources of hedge money, 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 recommendations at a lot lower price, it differentiates a few of the underlying ways and explains how hedge fund replication can increase your individual funding approach into hedge money.
Written by means of the well-known Hedge Fund professional and writer Lars Jaeger, the ebook is split into 3 sections: Hedge Fund heritage, go back resources, and Replication ideas. part one offers a quick direction in what hedge cash really are and the way they function, arming the reader with the heritage wisdom required for the remainder of the ebook. part illuminates the resources from which hedge cash derive their returns and exhibits that most of hedge fund returns derive from systematic probability publicity instead of supervisor "Alpha". part 3 offers numerous ways to replicating hedge fund returns through providing 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 techniques that underlie them.
With hedge fund replication going mainstream, this e-book presents transparent tips at the subject to maximize returns.
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Extra resources for Alternative Beta Strategies and Hedge Fund Replication
Jaeger, ‘Risk management and transparency in the construction and monitoring of a fund of hedge funds portfolio’ (2003). g. g. a company bankruptcy or negative earning outlook leading to a decline of a particular company’s stock). According to capital asset pricing theories, exposure to systematic risks is rewarded with expected excessive return, the risk premium. Asset pricing theory also refers to these returns as ‘beta returns’. In contrast, nonsystematic risks, that can be diversified by the investors, do not yield expected excess return and should therefore be avoided.
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). 30 See also D. Strachmann, Julian Robertson – A Tiger in the Land of Bulls and Bears (2004). P1: JYS c02 JWBK289-Jaeger 24 August 18, 2008 8:47 Printer: Yet to come Alternative Beta Strategies and Hedge Fund Replication Excursion: Soros fund management Soros started his hedge fund in 1969.
33 But with increasing mainstream acceptance, regulators and lawmakers have started to allow them to re-enter the developed investment market and offer their products to a wider public. 6 THE HEDGE FUND INDUSTRY TODAY Recent years have seen the continuation of unparalleled growth in hedge funds, in terms of asset inflow as well as number of funds. 3 displays this growth. Ironically the bear equity market period of 2000–2003 as well as occasional periods of market distress in the subsequent bull market from 2003 to 2007 coincided with unprecedented hedge fund underperformance (relative to their historic average, not relative to equity markets).
Alternative Beta Strategies and Hedge Fund Replication by Lars Jaeger