Alternative Beta Strategies and Hedge Fund Replication by Lars Jaeger
By Lars Jaeger
There s a buzzword that has quick captured the mind's eye of product prone and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund ideas capacity replicating their go back assets and corresponding possibility exposures. although, there nonetheless lacks a coherent photograph on what hedge fund replication skill in perform, what its premises are, how you can distinguish di erent methods, 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 concepts and Hedge Fund Replication offers a different specialise in replication, explaining alongside the best way the go back assets of hedge money, and their systematic hazards, that make replication attainable. It explains the heritage to the recent dialogue on hedge fund replication and the way to derive the returns of many hedge fund concepts at a lot cheaper price, it differentiates some of the underlying techniques and explains how hedge fund replication can increase your individual funding approach into hedge funds.
Written by means of the well-known Hedge Fund professional and writer Lars Jaeger, the booklet is split into 3 sections: Hedge Fund history, go back assets, and Replication options. part one offers a brief direction in what hedge money really are and the way they function, arming the reader with the heritage wisdom required for the remainder of the publication. part illuminates the resources from which hedge cash derive their returns and indicates that almost all of hedge fund returns derive from systematic hazard publicity instead of supervisor "Alpha". part 3 provides a variety of methods to replicating hedge fund returns by means of providing the 1st and moment iteration of hedge fund replication items, issues out the pitfalls and strengths of some of the methods and illustrates the mathematical options that underlie them.
With hedge fund replication going mainstream, this ebook offers transparent information at the subject to maximize returns.
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There s a buzzword that has fast captured the mind's eye of product prone and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund innovations potential replicating their go back resources and corresponding chance exposures. even though, there nonetheless lacks a coherent photograph on what hedge fund replication potential in perform, what its premises are, tips to distinguish di erent ways, and the place this may lead us to.
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Additional resources for Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance)
44 manager skill’ by F. Edwards and M. ’ by R. McFall Lamm Jr. (1999). 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.
By G. Amin and H. Kat (2001); ‘On the performance of hedge funds’ by L. Bing (1999); ‘Hedge fund performance: 1990–1999’ by L. Bing (2001); ‘Hedge fund performance and P1: JYS c02 JWBK289-Jaeger August 18, 2008 8:47 Printer: Yet to come What Are Hedge Funds 31 a combination of stocks and bonds) includes only two general return sources, that is the equity risk premium and (interest rate) term structure risk premium. As I will discuss in the coming chapters, hedge funds provide investors the access to new alternative ‘risk premia’ and thus additional return sources.
In the past hedge fund managers themselves and their marketers were guilty of propagating this myth. 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).