Special to AllAboutAlpha.com
By: Maurus Bossi, Chairman & CEO, AlphaSwiss Group
We have been reading your blog with interest and we think that we might also be able to add some thoughts on the discussion about alternative beta. We also think that our view is quite different from the hedge fund replication group and Harry Kat’s view on the subject.
AlphaSwiss has been running fund of hedge fund products for nearly two years on our more pragmatic and proprietary Alternative Beta® approach. We have tried to cut through the older marketing concepts of existing hedge fund providers that were mainly selling their products as pure alpha or absolute return products â€“ not really accurate in our view.
It is our objective to point out that alternative investing is not a new world in investment management, but rather an interesting and fruitful extension that provides investors with additional opportunities and a higher degree of freedom. We believe that our view of alternative beta helps investors to better understand what they are dealing with and provides a clearer concept of how to invest into alternative investments.
During the last few months the discussion about Alpha and Beta in the hedge fund area has gained steam. This was mainly ignited by the launch of hedge fund replication products by Goldman Sachs, Merrill Lynch and Partners Group, which try to passively mimic hedge fund strategies at lower cost. Their assumption is that the largest part of hedge fund returns results from risk premiums (betas) and that similar or better returns can be achieved by replicating hedge fund strategies through statistical methods.
AlphaSwiss is also convinced that the largest part of hedge fund returns results from risk premiums. But AlphaSwiss has chosen a different path than pure quantitative replication – we have developed our proprietary Alternative Beta® approach. Its objective is to actively identify alternative systematic risk premiums and to understand the economic reasoning behind and characteristics of these premiums. The focus of our approach is the search for and the investing into interesting and exotic investment risks that provide superior value-added in terms of return, diversification and capacity. Since May 2005 this approach is successfully implemented in our funds.
– Maurus Bossi, February 7, 2007
(ed: Mr. Bossi and Prof. Kat will both be addressing IRC’s “Alternative Beta and Hedge Fund Replication” conference in London next week.)