By: Sandra L. Manzke, MAXAM Capital Management
Here’s a question: is a passive investment in alpha-producing hedge funds an oxymoron?
If a return stream can be replicated with a passive investment, then isn’t it beta? This is certainly the case when it comes to index investing. But doesn’t the very existence of a risk premium on a defined “asset class” (we hate using this term to describe hedge funds) mean that there are systematic risks that earn a market-appropriate level of compensation?
Unfortunately, this article doesn’t really provide answers. But at least it raises the right questions.
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