Hedge fund replication using strategy specific factors

Hedge Fund Strategy Performance: Using Conditional Approaches

The search for methodologies that accurately measure performance and performance persistence continues to evolve. This is especially true for investment strategies such as hedge funds, which have been shown, in several instances, to not be normally distributed. In this article, we evaluate performance of hedge funds using conditional approaches and GMM. Unlike the Sharpe ratio or Jensen’s alpha...

Selecting A Hedge Fund Replication Approach

Hedge Fund Replication: A Model Combination Approach

Recent years have seen increased demand from institutional investors for passive replication products that track the performance of hedge fund strategies. We find that, in practice, linear replication methods routinely suffer from poor tracking performance and high turnover. To address these concerns, we propose a model combination approach to index replication that pools information from a div...

Hedge fund replication, alternative beta and benchmarking

In this Russell Research Report, we explore the potential for replication in the context of the evolution of the hedge fund industry and the investment industry as a whole. Our key theme is the importance of alternative beta indexes, both for replication and as benchmarks for the hedge fund industry. With the term alternative beta, we refer to systematic factors beyond those that can today be t...

Strategy Distinctiveness and Hedge Fund Performance

Presumably, hedge fund managers pursue unique strategies because they have great new ideas and superior investment skills, while less skilled managers are more likely to herd and follow publicly known investment ideas. For investors, knowing how innovative and skillful their managers are is thus extremely important but very difficult because of the opaque nature of hedge fund operations. In thi...