Abstract
| Original language | English |
|---|---|
| Title of host publication | Hedge Funds |
| Subtitle of host publication | Structure, Strategies, and Performance |
| Editors | H. Kent Baker, Greg Filbeck |
| Place of Publication | Oxford UK |
| Publisher | Oxford University Press |
| Chapter | 25 |
| Pages | 460-490 |
| Number of pages | 31 |
| Edition | 1st |
| ISBN (Print) | 9780190607371 |
| DOIs | |
| Publication status | Published - 2017 |
Keywords
- hedge fund replication
- hedge fund
- index
- tracking error
- hedge fund clone
- systematic risk
- non-linear exposures
Cite this
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Hedge fund replication. / Tupitsyn, Mikhail; Lajbcygier, Paul.
Hedge Funds: Structure, Strategies, and Performance. ed. / H. Kent Baker; Greg Filbeck. 1st. ed. Oxford UK : Oxford University Press, 2017. p. 460-490.Research output: Chapter in Book/Report/Conference proceeding › Chapter (Book) › Research › peer-review
TY - CHAP
T1 - Hedge fund replication
AU - Tupitsyn, Mikhail
AU - Lajbcygier, Paul
PY - 2017
Y1 - 2017
N2 - In theory, analogous to equity indices, hedge fund indices can provide broad exposure to hedge funds in a cost-effective manner. In practice, however, hedge fund indices are difficult to implement because direct investment in hedge funds is impractical. Unlike equities, hedge funds are not traded on liquid secondary markets and are often closed to new investment. A solution is hedge fund replication, which, rather than require direct investment in hedge funds, synthetically recreates hedge fund index returns by investing in portfolios that are exposed to the same underlying economic factors that drive hedge fund returns. This approach provides broad, cost-effective, hedge fund exposure and avoids the practical problems associated with direct hedge fund investment. As a consequence, such hedge fund clones exhibit lower tracking error and substantially higher raw and risk-adjusted returns than both investible and noninvestible hedge fund indices.
AB - In theory, analogous to equity indices, hedge fund indices can provide broad exposure to hedge funds in a cost-effective manner. In practice, however, hedge fund indices are difficult to implement because direct investment in hedge funds is impractical. Unlike equities, hedge funds are not traded on liquid secondary markets and are often closed to new investment. A solution is hedge fund replication, which, rather than require direct investment in hedge funds, synthetically recreates hedge fund index returns by investing in portfolios that are exposed to the same underlying economic factors that drive hedge fund returns. This approach provides broad, cost-effective, hedge fund exposure and avoids the practical problems associated with direct hedge fund investment. As a consequence, such hedge fund clones exhibit lower tracking error and substantially higher raw and risk-adjusted returns than both investible and noninvestible hedge fund indices.
KW - hedge fund replication
KW - hedge fund
KW - index
KW - tracking error
KW - hedge fund clone
KW - systematic risk
KW - non-linear exposures
U2 - 10.1093/oso/9780190607371.003.0025
DO - 10.1093/oso/9780190607371.003.0025
M3 - Chapter (Book)
SN - 9780190607371
SP - 460
EP - 490
BT - Hedge Funds
A2 - Baker, H. Kent
A2 - Filbeck, Greg
PB - Oxford University Press
CY - Oxford UK
ER -