By Lars Jaeger
There s a buzzword that has fast captured the mind's eye of product companies and traders alike: "hedge fund replication". within the broadest feel, replicating hedge fund thoughts capacity replicating their go back assets and corresponding probability exposures. despite the fact that, there nonetheless lacks a coherent photo on what hedge fund replication capability in perform, what its premises are, the way to distinguish di erent methods, and the place this may lead us to.
Serving as a guide for replicating the returns of hedge cash at significantly cheaper price, Alternative Beta options and Hedge Fund Replication presents a distinct specialize in replication, explaining alongside the way in which the go back resources of hedge money, and their systematic dangers, that make replication attainable. It explains the history to the hot dialogue on hedge fund replication and the way to derive the returns of many hedge fund suggestions at a lot cheaper price, it differentiates many of the underlying techniques and explains how hedge fund replication can enhance your individual funding technique into hedge funds.
Written by means of the well-known Hedge Fund specialist and writer Lars Jaeger, the booklet is split into 3 sections: Hedge Fund heritage, go back assets, and Replication ideas. part one offers a brief path in what hedge money truly are and the way they function, arming the reader with the heritage wisdom required for the remainder of the ebook. part illuminates the resources from which hedge money derive their returns and indicates that most of hedge fund returns derive from systematic possibility publicity instead of supervisor "Alpha". part 3 offers numerous methods to replicating hedge fund returns through featuring the 1st and moment new release of hedge fund replication items, issues out the pitfalls and strengths of a few of the techniques and illustrates the mathematical innovations that underlie them.
With hedge fund replication going mainstream, this publication offers transparent information at the subject to maximize returns.
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Extra resources for Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance)
6) Hedge funds offer no economic value This myth is related to myth number (2). As we state in the hypothesis underlying the entire book, most hedge fund returns derive from risk premia which makes them not much different from other agents in financial markets. Most hedge funds are long-term in nature and largely base their decision-making process on fundamental analysis. This actually increases market efficiency. In reality, hedge funds often act to counter price changes that are not based on fundamentals, such as irrational earning expectations.
21 19 The following two publications investigate the influence of hedge funds on financial markets in more detail: W. Fung, D. Hsieh, ‘Measuring the market impact of hedge funds’ (2000); S. , ‘Hedge funds and the Asian currency crisis’ (2000). fsa. pdf 21 Financial Stability Review of the European Central Bank, p. 123 (December 2004). P1: JYS c02 JWBK289-Jaeger 22 August 18, 2008 8:47 Printer: Yet to come Alternative Beta Strategies and Hedge Fund Replication However, one must note that while they still represent rather small assets invested worldwide, hedge funds account for a disproportionately high amount of global trading behavior due to their higher average trading frequency that comes with active investing.
The drawdown was caused mainly because after staying on the sidelines/being positioned against technology throughout most of the equity market bubble in 98/99, they finally jumped on the bandwagon in mid-1999 (which at first helped them in Q4 1999). In Q1 2000, when the technology sell-off started, the fund was still heavily overloaded with tech stocks; the decision to double up the most promising tech positions after the first decline in April 2000 did not help a lot. They lost most of the external assets and key people by April 2000.
Alternative Beta Strategies and Hedge Fund Replication (Wiley Finance) by Lars Jaeger