Hedge fund replication

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...

Replication Methods and Return Characteristics of Hedge Fund ETFs

Hedge Fund Replication: Traditional Beta, Alternative Beta, and Alpha

Traditional betas refer to the sensitivity of returns to traditional securities, such as stocks, bonds and cash. Alternative betas represent sensitivity to other systematic market factors, such as credit spreads, higher yielding or ‘carry’ currencies, volatility, illiquidity, and other potential return sources (Exhibit 1). ‘Alpha’ is often synonymous with manager skill, but perhaps is better th...