Hedge Fund Clones
Cloning Hedge Funds
Firms launching hedge fund clones include Goldman Sachs, Merill Lynch, Morgan Chase, State Street Global, and Deutsche Bank. Most hedge fund clones offered by these firms can be purchased and sold on a daily or weekly basis.
Most of these hedge fund clones are structured as premium indexes. This is why many researchers on the academic and professional side of the investment industry have doubts about the returns that hedge fund clones will produce. Hedge fund clones indexes may be superior to several other indexes in terms of total return but nobody could expect an index to keep up with the returns of the top 20% of hedge funds which is partially what motivates high net worth investments to invest in hedge funds in the first place.
Most hedge fund clones are created using the "factor model approach." This approach creates the hedge fund clones by looking at the performance over the last set period of time such as one year and then figuring out what securities you would have had to hold to achieve those returns. This is an important point to understand as this approach has been criticized as simply creating a similar risk/reward portfolio to hedge funds without any of the diversified asset as nimbly adjusted portfolios of true hedge funds. While most of these hedge fund clone models are updated each month I would venture to say this will speed up to once a week or even more frequently in the near future as the products become more competitive.
For more information on hedge fund clones please see these 3 resources:
- New York Hedge Fund Guide
- Switzerland Hedge Fund Guide
- Russian Hedge Fund Guide
- South Africa Hedge Fund Guide
- Mexico Hedge Fund Guide
- Canada Hedge Fund Guide
- Texas Hedge Fund Guide
- San Francisco Hedge Fund Guide
- California Hedge Fund Guide
- London Hedge Fund Guide
Link to This Resource: Hedge Fund Cloneshttp://richard-wilson.blogspot.com/2007/07/hedge-fund-cloning.html