http://allaboutalpha.com/blog/2007/02/12/movie-stars-super-models-and-alternative-beta/ A finance blog about hedge funds, portable alpha and alternative investing. Thu, 09 Feb 2012 19:03:08 +0000 http://wordpress.org/?v=abc hourly 1 http://allaboutalpha.com/blog/2007/02/12/movie-stars-super-models-and-alternative-beta/comment-page-1/#comment-7036 allaboutalpha.com: Welcome to AllAboutAlpha.com Mon, 28 May 2007 23:26:58 +0000 http://allaboutalpha.com/blog/2007/02/12/movie-stars-super-models-and-alternative-beta/#comment-7036 [...] The early spin deserves both laurels and darts. Â Deutsche Bank deserves kudos for addressing a common concern about hedge fund replication offerings - that they only attempt to replicate hedge fund returns after fees.  There are those who feel that this might be okay if those suppliers didn’t also attack hedge funds for charging too much.  After a landmark event on hedge fund replication in London last winter, one reader wrote us to express several concerns.  One of those concerns read as follows: “Just what is being replicated? My understanding…is that (hedge fund replicators) are modeling HF returns net of fees. The utility to the end investor will be the same as if they were paying large fees to a hedge fund manager. The saving on fees does not lead to higher returns to the investor. This has been conveniently overlooked.” [...] [...] The early spin deserves both laurels and darts. Â Deutsche Bank deserves kudos for addressing a common concern about hedge fund replication offerings – that they only attempt to replicate hedge fund returns after fees.  There are those who feel that this might be okay if those suppliers didn’t also attack hedge funds for charging too much.  After a landmark event on hedge fund replication in London last winter, one reader wrote us to express several concerns.  One of those concerns read as follows: “Just what is being replicated? My understanding…is that (hedge fund replicators) are modeling HF returns net of fees. The utility to the end investor will be the same as if they were paying large fees to a hedge fund manager. The saving on fees does not lead to higher returns to the investor. This has been conveniently overlooked.” [...]

]]> http://allaboutalpha.com/blog/2007/02/12/movie-stars-super-models-and-alternative-beta/comment-page-1/#comment-834 All About Alpha » Blog Archives » Atlanta Fed Q4 Economic Review: Focus on Hedge Funds Mon, 26 Feb 2007 14:33:04 +0000 http://allaboutalpha.com/blog/2007/02/12/movie-stars-super-models-and-alternative-beta/#comment-834 [...] We agree with this observation. Â After all, a lower cost structure (assuming for a moment that replication works), is no reason to set a low price.  When was the last time a money manager said “Oh. Okay.  I’ll drop my management fees now that Bloomberg has given me sweetheart a deal on those terminals.”?  In a posting on February 12, we wrote: “… the assumption that replicated hedge funds will necessarily be cheaper than real hedge funds is based on the assumption that traditional hedge funds price their services based on their costs. But the high profits earned by hedge fund managers and the extreme scalability of their business models clearly shows that hedge fund fees are currently based on their value to investors, not their underlying costs. So why would these new players want to set bargain prices for their services?” [...] [...] We agree with this observation. Â After all, a lower cost structure (assuming for a moment that replication works), is no reason to set a low price.  When was the last time a money manager said “Oh. Okay.  I’ll drop my management fees now that Bloomberg has given me sweetheart a deal on those terminals.”?  In a posting on February 12, we wrote: “… the assumption that replicated hedge funds will necessarily be cheaper than real hedge funds is based on the assumption that traditional hedge funds price their services based on their costs. But the high profits earned by hedge fund managers and the extreme scalability of their business models clearly shows that hedge fund fees are currently based on their value to investors, not their underlying costs. So why would these new players want to set bargain prices for their services?” [...]

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