By Lars Jaeger
There s a buzzword that has quick captured the mind's eye of product companies and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund recommendations potential replicating their go back resources and corresponding danger exposures. although, there nonetheless lacks a coherent photo on what hedge fund replication potential in perform, what its premises are, the right way to distinguish di erent methods, and the place this may lead us to.
Serving as a guide for replicating the returns of hedge money at significantly lower price, Alternative Beta concepts and Hedge Fund Replication presents 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 historical past to the hot dialogue on hedge fund replication and the way to derive the returns of many hedge fund options at a lot lower price, it differentiates many of the underlying ways and explains how hedge fund replication can increase your personal funding approach into hedge funds.
Written through 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 suggestions. part one offers a quick path in what hedge money really are and the way they function, arming the reader with the history wisdom required for the remainder of the booklet. part illuminates the resources from which hedge money derive their returns and indicates 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 through offering the 1st and moment new release of hedge fund replication items, issues out the pitfalls and strengths of some of the methods and illustrates the mathematical recommendations that underlie them.
With hedge fund replication going mainstream, this ebook offers transparent suggestions at the subject to maximize returns.
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Extra info for Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance)
E. org for more details. 40 There are several empirical studies illustrating the return and risk characteristics of hedge funds and showing the benefits of hedge funds in traditional portfolios. Please refer to the following original studies: ‘The risk in hedge fund strategies: alternative alphas and alternative betas’ by W. Fung and D. Hsieh (2003); The Benefits of Hedge Funds by T. Schneeweiss and G. Martin (2000); Understanding Hedge Fund Performance: Research Results and Rules of Thumb for the Institutional Investor by T.
Hedge fund replication builds on the premise that a large part of the return sources of hedge funds are risk premia and outlines what the underlying systematic risks are. Nevertheless market inefficiencies, once they occur, can offer superior returns to those who are capable of exploiting them. They occur mostly in markets where information does not flow freely, as is often the case in less liquid and smaller markets (which, however, bear their own risks – mostly related to limited liquidity, as the events since the summer of 2007 have served investors as a valuable reminder).
But the industry not only recovered but expanded. The years since 1998 are now being referred to as the ‘institutionalization phase’. Hedge funds prospered and looked increasingly attractive in the equity bear market that followed the bursting of the ‘New Economy’ bubble. Today the hedge fund industry is developed enough to be considered as an asset class in itself by most investors. On the demand side, institutional investors are increasingly interested in the risk–reward characteristics of hedge funds.
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