State Street MD on hedge replication model: “I was shocked the explanatory power was so high”

Feb 28th, 2007 | Filed under: Alternative Beta & Hedge Fund Replication | By:
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Meanwhile Hedge Fund Sector Returns Can be Synthesized

By: Alex Dunnin, Financial Standard
Published: February 26, 2007

State Street Global Advisors looks to be the next major player to enter the hedge fund replication business.  Paul Brakke, Senior Managing Director at SSgA is down under this week pitching pensions on the latest craze.  Says Financial Standard:

“By using benchmarks from Hedge Fund Research, a hedge fund research group that monitors more than 6,000 hedge funds globally, Brakke said investment style analysis they applied to these figures found asset allocation and style explained 85 per cent of the return outcomes.”

Brakke tells Financial Standard:

“If you put all the hedge fund managers together all the esoteric [investment] mixes start to cancel each other out…I was shocked the explanatory power was so high.”

We wonder if SSgA’s hedge fund of funds people were equally as shocked…

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  1. From New York to Nicosia » Blog Archive » Can Hedge Funds Alpha Be Replicated With Low Cost Products? November 18th, 2008 3:48 pm :

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