http://allaboutalpha.com/blog/2006/11/30/superstars-or-average-joes-a-replication-based-performance-evaluation-of-1917-individual-hedge-funds/ A finance blog about hedge funds, portable alpha and alternative investing. Mon, 13 Feb 2012 11:26:54 +0000 http://wordpress.org/?v=abc hourly 1 http://allaboutalpha.com/blog/2006/11/30/superstars-or-average-joes-a-replication-based-performance-evaluation-of-1917-individual-hedge-funds/comment-page-1/#comment-343 All About Alpha » Blog Archives » Professor Harry Kat Speaks Out: Hedge Fund “Replication” a Misnomer Mon, 22 Jan 2007 03:06:05 +0000 http://allaboutalpha.com/blog/2006/11/30/superstars-or-average-joes-a-replication-based-performance-evaluation-of-1917-individual-hedge-funds/#comment-343 [...] “Based on our own research, we estimate that in the current environment in 70-80% of the cases a hedge fund (of funds) manager’s contribution to the after-fee bottom line is zero or negative. Whenever this is the case, investors basically allow the manager to make a (very good) living using their money, without getting anything in return. Unless one is genuinely attracted to this form of charity, in these cases it is worth replacing the manager in question by a synthetic fund. A synthetic fund produces no pre-fee alpha, but it doesn’t cost a fortune to run either. In addition to generating hedge fund resembling returns, synthetic funds also come with a number of other benefits, such as great improvements in liquidity, transparency, capacity, etc., which makes the decision to go for the synthetic fund even easier. [...] [...] “Based on our own research, we estimate that in the current environment in 70-80% of the cases a hedge fund (of funds) manager’s contribution to the after-fee bottom line is zero or negative. Whenever this is the case, investors basically allow the manager to make a (very good) living using their money, without getting anything in return. Unless one is genuinely attracted to this form of charity, in these cases it is worth replacing the manager in question by a synthetic fund. A synthetic fund produces no pre-fee alpha, but it doesn’t cost a fortune to run either. In addition to generating hedge fund resembling returns, synthetic funds also come with a number of other benefits, such as great improvements in liquidity, transparency, capacity, etc., which makes the decision to go for the synthetic fund even easier. [...]

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