http://allaboutalpha.com/blog/2007/02/13/flying-dutchman-portends-doom-for-hedge-fund-industry/ 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/2007/02/13/flying-dutchman-portends-doom-for-hedge-fund-industry/comment-page-1/#comment-595 Carvalhor1 Wed, 14 Feb 2007 09:33:41 +0000 http://allaboutalpha.com/blog/2007/02/13/flying-dutchman-portends-doom-for-hedge-fund-industry/#comment-595 The fact that Kat's strategy does not replicate the short-term returns of hedge funds, just mimics the distribution of returns, means that it should likely exhibit low-correlation with most hedge fund strategies. That could make the case for Kat's strategies as extra source of diversification but not necessarily a replacement of hedge funds. The second question is liquidity. What is the capacity of a fund implementing Kat's algorithms? Since it uses futures it is likely to be large but nevertheless limited. I would be rather surprised it can cope with the USD 2 trillion currently chasing alpha in the hedge fund world. The fact that Kat’s strategy does not replicate the short-term returns of hedge funds, just mimics the distribution of returns, means that it should likely exhibit low-correlation with most hedge fund strategies. That could make the case for Kat’s strategies as extra source of diversification but not necessarily a replacement of hedge funds. The second question is liquidity. What is the capacity of a fund implementing Kat’s algorithms? Since it uses futures it is likely to be large but nevertheless limited. I would be rather surprised it can cope with the USD 2 trillion currently chasing alpha in the hedge fund world.

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