Hedge Fund Cloning to “Turn Industry Upside Down”

International hedge fund celebrity, Lars Jaegar (see research) told Dailyii on Tuesday that hedge fund cloning could have a “dramatic effect” on the industry.  He went on to say “This is going to turn the industry upside down”.

MIT’s Andrew Lo (see research) agrees, telling FT his cloning process aims “to threaten existing hedge funds that disguise beta as alpha.”

We agree, but would extend this reasoning to the world of long-only investing (e.g. mutual funds), where disguising beta as alpha has been the norm for some time (see research on index-hugging by mutual funds).

Dailyii also makes reference to Professor Harry Kat’s new cloning method without naming it.  Kat tells AllAboutAlpha the project is the result of two years of work on the topic.  For those who are interested (and we all ought to be), it can be found at www.fundcreator.com.

For some reason, we’re reminded of another professor who toiled over his own cloning experiment that aimed to turn the world upside down.  Let this be a warning to us all! 😉

“It was on a dreary night of November, that I beheld the accomplishment of my toils. With an anxiety that almost amounted to agony, I collected the instruments of life around me, that I might infuse a spark of being into the lifeless thing that lay at my feet. It was already one in the morning; the rain pattered dismally against the panes, and my candle was nearly burnt out, when, by the glimmer of the half-extinguished light, I saw the dull yellow eye of the creature open; it breathed hard, and a convulsive motion agitated its limbs.”

– Mary Shelley’s Frankenstein

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