Download or read book Alternative Beta Strategies and Hedge Fund Replication written by Lars Jaeger and published by John Wiley & Sons. This book was released on 2008-10-13 with total page 272 pages. Available in PDF, EPUB and Kindle. Book excerpt: There s a buzzword that has quickly captured the imagination of product providers and investors alike: "hedge fund replication". In the broadest sense, replicating hedge fund strategies means replicating their return sources and corresponding risk exposures. However, there still lacks a coherent picture on what hedge fund replication means in practice, what its premises are, how to distinguish di erent approaches, and where this can lead us to. Serving as a handbook for replicating the returns of hedge funds at considerably lower cost, Alternative Beta Strategies and Hedge Fund Replication provides a unique focus on replication, explaining along the way the return sources of hedge funds, and their systematic risks, that make replication possible. It explains the background to the new discussion on hedge fund replication and how to derive the returns of many hedge fund strategies at much lower cost, it differentiates the various underlying approaches and explains how hedge fund replication can improve your own investment process into hedge funds. Written by the well known Hedge Fund expert and author Lars Jaeger, the book is divided into three sections: Hedge Fund Background, Return Sources, and Replication Techniques. Section one provides a short course in what hedge funds actually are and how they operate, arming the reader with the background knowledge required for the rest of the book. Section two illuminates the sources from which hedge funds derive their returns and shows that the majority of hedge fund returns derive from systematic risk exposure rather than manager "Alpha". Section three presents various approaches to replicating hedge fund returns by presenting the first and second generation of hedge fund replication products, points out the pitfalls and strengths of the various approaches and illustrates the mathematical concepts that underlie them. With hedge fund replication going mainstream, this book provides clear guidance on the topic to maximise returns.

Download or read book Hedge Fund Beta Replication written by Peter Lee and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: During the past few years, hedge fund beta replication strategies have become more common. At the same time, questions about the relevance, performance, and applicability of these strategies have been raised in response to the rapidly shifting landscape in the hedge fund industry. We present a review of the growing beta replication industry with particular emphasis on the ASG Global Alternatives Fund. We discuss the motivation for its existence and the logic of its absolute and relative performance over time and across different market environments. We also explain why these strategies are complements to, and not substitutes for, direct investments in hedge funds, and provide examples of their value-added in investors' portfolios.

Download or read book Hedge Fund Replication written by G. Gregoriou and published by Springer. This book was released on 2011-11-07 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt: While there may be a consensus in the industry that hedge funds clones will bring better liquidity and lower fees, it is still debatable whether replication products should serve as a complement in the hedge fund allocation decision or as a replacement. This book offers the reader valuable insights into the thinking behind hedge fund replication.

Download or read book Alternative Beta Applied An Introduction to Hedge Fund Replication written by Roman Tancar and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Motivated by the surge in popularity of passive hedge fund investments, the present article discusses the concept of quot;alternative betaquot; and its implications for the hedge fund industry. The article covers a variety of topics, ranging from the basic rationale for hedge fund replication to replication methodologies and products to the academic and financial market environment. We find that with their radical departure from the hedge fund hallmark of alpha delivery, passive replication products represent the next generation of hedge fund investing, and offer the catalyst for further development of the matured hedge fund industry. Further, we show how the alternative beta concept contributes to a proper separation of alpha, and thus enhances the overall efficiency and quality of hedge fund returns. The article also demonstrates that hedge fund replication can take several different forms. In conclusion, we believe that passive hedge fund products have the potential to consistently outperform mediocre (funds of) hedge funds on an after-fee basis.

Download or read book Tracking Problems Hedge Fund Replication and Alternative Beta written by Thierry Roncalli and published by . This book was released on 2009 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: As hedge fund replication based on factor models has encountered growing interest among professionals and academics, and despite the launch of numerous products (indexes and mutual funds) in the past year, it faced many critics. In this paper, we consider three of the main critiques, namely the lack of reactivity of hedge fund replication and its deficiency in capturing tactical allocations; its failure to apprehend non-linear positions of the underlying hedge fund industry and higher moments of hedge fund returns; and, finally, the lack of access to the alpha of hedge funds. To address these problems, we consider hedge fund replication as a general tracking problem which may be solved by means of Bayesian filters. Using the linear Gaussian model as a basis for discussion, we provide the reader with an intuition for the inner tenets of the Kalman filter and illustrate the results' sensitivity to the algorithm specification choices. This part of the paper includes considerations on the type of strategies which can be replicated, as well as the problem of selecting factors. We then apply more advanced Bayesian filters' algorithms, known as particle filters, to capture the non-normality and non-linearities documented on hedge fund returns. Finally, we address the problem of accessing the pure alpha by proposing a core/satellite approach of alternative investments between high-liquid alternative beta and less liquid investments.

Download or read book Hedge Funds written by Andrew W. Lo and published by Princeton University Press. This book was released on 2010-07-01 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt: The hedge fund industry has grown dramatically over the last two decades, with more than eight thousand funds now controlling close to two trillion dollars. Originally intended for the wealthy, these private investments have now attracted a much broader following that includes pension funds and retail investors. Because hedge funds are largely unregulated and shrouded in secrecy, they have developed a mystique and allure that can beguile even the most experienced investor. In Hedge Funds, Andrew Lo--one of the world's most respected financial economists--addresses the pressing need for a systematic framework for managing hedge fund investments. Arguing that hedge funds have very different risk and return characteristics than traditional investments, Lo constructs new tools for analyzing their dynamics, including measures of illiquidity exposure and performance smoothing, linear and nonlinear risk models that capture alternative betas, econometric models of hedge fund failure rates, and integrated investment processes for alternative investments. In a new chapter, he looks at how the strategies for and regulation of hedge funds have changed in the aftermath of the financial crisis.

Download or read book Alternative Routes to Hedge Fund Return Replication written by Harry M. Kat and published by . This book was released on 2007 with total page 29 pages. Available in PDF, EPUB and Kindle. Book excerpt: With average hedge fund performance steadily deteriorating and equity markets picking up again, interest in hedge fund return replication as a cheaper means of obtaining hedge fund-like returns is growing steadily. Currently, there are various products on offer. Compared to real hedge funds (of funds), all of them offer improved liquidity, transparency, capacity, etc. and thereby solve a range of problems surrounding hedge fund investment. There are, however, substantial differences in terms of their attraction as portfolio diversifiers. The multi-strategy replication products offered by Merrill Lynch (Factor Index), Goldman Sachs (ART Index), and Partners Group (ABS fund) exhibit a strong correlation with the stock market. This severely limits these products' attraction as portfolio diversifiers. FundCreator does not necessarily replicate any specific fund or index, but allows investors to design their own diversifier from scratch. This gives investors a unique opportunity to create new tailor-made diversifiers with characteristics that are optimal given their existing portfolios. Clearly, this makes FundCreator-based synthetic funds much more attractive than the various multi-strategy hedge fund replication and alternative beta products currently on offer.

Download or read book Risk and Beta Anatomy in the Hedge Fund Industry written by Roberto Savona and published by . This book was released on 2012 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a Bayesian time-varying beta model we explore how the systematic risk exposures of hedge funds vary over time conditional on some exogenous variables that managers are assumed to use in changing their trading strategies. In such a setting, we impose a structure on fund returns, betas and benchmark returns, developing a framework that could help explain how expected and unexpected hedge fund returns are correlated with systematic risk factors through the beta dynamics. Such a system also provides a useful way of, (a) inspecting how and through which channels systemic risk propagates over time; (b) evaluating the performance conditional on public information within a Bayesian context; (c) cloning hedge funds by the mean of beta replication; (d) monitoring the risk of hedge fund returns on a VaR-based context. Major findings of this work, based on the analysis of the CSFB/Tremont indices over the period 01/1994-09/2008, are that: (1) volatility, changes in T-bill, term spread and shocks in liquidity significantly impact on time variation of hedge fund betas; (2) increasing interdependencies in beta dynamics among hedge funds together with leverage levels and shocks in liquidity are the key factors underlying the dynamics of systemic risk; (3) conditional time variation in betas leads to conclude that hedge fund industry did not delivered excess returns over their own style benchmark; (4) replicating the risk/return characteristics of hedge funds through our beta modelling seems to do a good job, also delivering better performances in a risk-adjusted basis; (5) simulation-based exercises on VaR predictions prove that our technology could be a serious candidate in hedge fund risk monitoring systems.

Download or read book Replication of Hedge Fund Investment Returns written by Annett Bieri and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In the last two years hedge fund replication has become en vogue as a number of investment banks have launched hedge fund replication products. This thesis discusses the development of these products and introduces some of the recently launched hedge fund clones. Further, this thesis evaluates risk, return and performance measures for three recently launched hedge fund replication products - the Merrill Lynch Factor Index (MLFI), the DB Absolute Return Beta Index (DBARB) and the Alternative Beta Strategies of Partners Group (PG ABS)- and compares these products with their respective hedge fund benchmarks. It is shown that the factor-based replication products (MLFI & DBARB) are able to replicate their benchmarks quite accurately but do not show better results than the hedge fund indices. The PG ABS on the other side - using a rule-based replication technique - is able to beat its benchmark. However, the product does not show better results than the S&P 500. Further, the thesis shows that neither hedge fund nor hedge fund replication products follow a normal distribution making the use of alternative performance measures indispensable for the evaluation of these products. Further, the implication of hedge fund replication products in a portfolio context is being discussed.

Download or read book An Alternative Approach to Alternative Beta written by Thierry Roncalli and published by . This book was released on 2007 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge fund replication based on factor models is encountering growing interest. In this paper, we investigate the implications of substituting standard rolling windows regressions, which appear ad-hoc, with more efficient methodologies like the Kalman Filter. We show that the copycats constructed this way offer risk-return profiles which share several characteristics with the ones posted by hedge funds indices: Sharpe ratios above buy-and-hold strategies on standard assets, moderate correlation with standard assets and limited drawdowns during equity downward trends. An interesting result is that the shortfall risk seems less important than with hedge fund indices and regressions based-trackers. We finally propose new breakdowns of hedge fund performance into alpha, traditional beta and alternative beta.

Download or read book Hedge Fund Alpha written by John M. Longo and published by World Scientific. This book was released on 2009 with total page 333 pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge funds are perhaps the hottest topic in finance today, but little material of substance to date has been written on the topic. Most books focus on how to set up a hedge fund and the basic strategies, while few to none focus on what matters most: generating and understanding investment performance. This book takes an exclusive look at the latter, including an analysis of the areas that are most likely to generate strong investment returns OCo namely, the emerging markets of Brazil, Russia, India and China. The book will be invaluable to not only financial professionals, but anyone interested in learning about hedge funds and their future.

Download or read book Hedge Fund Replication Beyond Alphas and Betas written by Ernst Eberlein and published by . This book was released on 2008 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: The concept of the gamma of a financed return as the highest level of stress that a return distribution can withstand is introduced. The various stress levels passed describe convex cones of acceptable cash flows that start with positive expectation and finish with arbitrage at infinity. Stress is measured by positive expectation under a concave distortion. Four distortions are employed. It is shown that the skewness, peakedness and tailweightedness of the centered and scaled random variable accessed by investment significantly affects the Sharpe ratio required to enter a target cone of acceptability. Results are illustrated on data for hedge fund returns and we raise the question of whether the gamma or acceptability levels of hedge fund returns can be replicated by portfolios seeking to access just the alphas and betas.

Download or read book Hedge Fund Replication Using a Strategy Specific Modeling Approach written by Sujit Subhash and published by . This book was released on 2014 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Institutional investors and wealthy individuals have in the past allocated a significant portion of their portfolios to hedge funds with the expectation of unconditional and uncorrelated returns to the market. However, the financial crisis of 2008 has heightened investor sensitivity to the high fees, illiquidity, and lockup periods typically associated with hedge funds. Hedge fund indexes showing excellent returns and low volatility contain funds that are closed to new investments, while the performance of investable funds have been shown to be inferior to their non-investable counterparts. The lack of transparency and extreme variation in the performance of hedge funds make the due diligence process critical in selecting the right fund. These challenges have motivated a search for an alternative to hedge funds. Recent research has established that a significant part of hedge fund returns can be replicated by portfolios constructed using liquid financial instruments. Hedge fund replication products, or clones, answer several challenges faced by hedge fund investors by providing daily liquidity, easy monitoring, and complete transparency at a significant cost advantage to hedge funds. This thesis examines the performance of clones constructed with factors selected based on the economic relevance to each hedge fund strategy by using both a passive model with constant portfolio weights, and an active model requiring monthly rebalancing of portfolio weights. These clones are further compared against the top performing hedge funds to analyze if the clones continue to deliver against a higher benchmark with regard to both risk and return"--Abstract, page iv.

Download or read book Beyond Smart Beta written by Gökhan Kula and published by John Wiley & Sons. This book was released on 2017-07-05 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: Delve into ETFs for smarter investing and a weatherproof portfolio Beyond Smart Beta is the investor's complete guide to index investing, with deep analysis, expert clarification and smart strategies for active portfolio management. From the general to the obscure, this book digs into every aspect of Exchange Traded Funds (ETFs) including ETCs and ETNs to break down the jargon and provide accessible guidance on utilising the indices as part of a more productive investment strategy. Succinct explanations of terms and concepts help you better grasp ETP anatomy, mechanics and practices, while examples, charts and graphs provide quick visual reference for total understanding. The expert author team examines the risks and benefits associated with various indexing approaches, sharing critical review of next-generation methods to help you make well-informed investment decisions. ETFs provide a solid foundation within mature and well-researched markets, allowing investors to focus on areas where active management has the potential to reap higher returns. This book shows you how to take full advantage of the growth of this market to strengthen your portfolio for the long term. Assess the current landscape and the anatomy of ETFs/ETPs Understand ETP handling, costs, trading, and investment Evaluate the pros and cons of next-generation indexing approaches Avoid risk while incorporating indices into an active portfolio management strategy Index concepts have evolved from basic, passive investments through Smart Beta, and are evolving into a third generation of products that will quickly become an important element of investor portfolios. Key benefits have propelled ETFs to surpass hedge funds in global capital, and the growth shows no sign of slowing. Beyond Smart Beta provides a primer for investors seeking to understand — and take advantage of — these lucrative new products.

Download or read book Equity Smart Beta and Factor Investing for Practitioners written by Khalid Ghayur and published by John Wiley & Sons. This book was released on 2019-06-12 with total page 496 pages. Available in PDF, EPUB and Kindle. Book excerpt: A guide to the popular and fast growing investment opportunities of smart beta Equity Smart Beta and Factor Investing for Practitioners offers a hands-on guide to the popular investment opportunities of smart beta, which is one of the fastest growing areas within the global equity asset class. This well-balanced book is written in accessible and understandable terms and contains an in-depth manual filled with analytical information and new ideas. The authors—noted experts in the field—include a definition of smart beta investing and detail its history. They also explore the distinguishing characteristics of smart beta strategies, offer an overview of factor investing, and reveal the implementation of smart beta approaches. Comprehensive in scope, the book contains helpful examples of applications, real-life illustrative case studies, and contributions from leading and respected practitioners that explain how they approach smart beta investing. This important book: Contains an in-depth exploration of smart beta investing Includes the information written in clear and accessible language Presents helpful case studies, illustrative examples, and contributions from leading and respected experts Offers a must have resource coauthored by the Head of Goldman Sachs’ equity smart beta business Written for investors who want to tap into the opportunities that smart beta offers, Equity Smart Beta and Factor Investing for Practitioners is the comprehensive resource for learning how to create more efficient overall equity portfolios.

Download or read book Investment Strategies of Hedge Funds written by Filippo Stefanini and published by John Wiley & Sons. This book was released on 2010-03-11 with total page 399 pages. Available in PDF, EPUB and Kindle. Book excerpt: One of the fastest growing investment sectors ever seen, hedge funds are considered by many to be exotic and inaccessible. This book provides an intensive learning experience, defining hedge funds, explaining hedge fund strategies while offering both qualitative and quantitative tools that investors need to access these types of funds. Topics not usually covered in discussions of hedge funds are included, such as a theoretical discussion of each hedge fund strategy followed by trading examples provided by successful hedge fund managers.

Download or read book Will Hedge Funds Regress Towards Index Like Products written by William Fung and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Hedge funds have grown substantially in the past few years. According to estimates by Tremont Capital Management (2006), the industry's assets under management increased from just over $200b in 2000 to over $800b by the end of 2005. Along with the rapid inflow of capital, hedge fund performance has declined. According to HFR, the average fund of hedge funds returned 10.5% per annum during 1996-2000, but only 5.8% during 2001-5. This development is consistent with the prediction of Berk and Green (2004) that unchecked inflow of funds will ultimately erode performance due to diminishing returns to scale. There is a sense of deja vu among hedge fund investors that many hedge fund managers are beginning to resemble active managers in the mutual fund industry of the past - failing to deliver returns commensurate to the fees and expenses they imposed on investors. History tells us that over-priced active managers will be replaced by low-cost passive index-liked alternatives. Could the same process be taking place in the hedge fund industry? Against this background, it is not surprising that investors are demanding more cost efficient hedge fund products. But, is existing technology capable of support the creation of rule-based, low-cost, passive hedge funds? The term quot;alternative betaquot; refers to the returns achievable from low-cost replication of rule-based trading strategies that capture return characteristics common across hedge funds, while quot;alternative alphaquot; refers to the returns that are not easily replicated. The introduction of this terminology was partly motivated by the need to stress that the search for hedge fund alpha properly begins with the identification of beta exposure to systematic risk factors which can go beyond conventional asset-class factors. This in turn points to the need for new technology if alternative beta factors are to be replicated successfully - a new tool kit is needed.