The term “alternative beta” was first coined by Professors Bill Fung and David Hsieh in 2003. Since that time, Bill Fung has been the world’s leading researcher into hedge fund replication.

• The drawbacks of simple replication
• The advantages of diversified streams of risk premia
• The need for alpha, and how to find it
• Why we still need fund of funds 

• The need for diversified sources of alternative beta 
• The issues trustees face with hedge fund investment
• The solution: transparent, scalable exposure to HFs
• The mechanics of the Alternative Beta Index (ABI)

• Embedding non-linear dynamics through rule-based trading strategies
• Customized replication by fund class
• Quantitative non-linear models for dynamic weightings of instruments and strategies
• Tradeoff between tracking risk, total risk and turnover

• Overview of dynamic replication of hedge fund trading strategies
• Benefits of replication strategies
• Potential problems in implementing a replication strategy
• Implementation of dynamic replication
• New areas of hedge fund replication

• Should alpha be measured against a hedge fund index?
• Clarifying common alpha, beta and benchmarking misnomers
• Indexation strategies pave the way for hedge fund replication models
• Hedge fund replication models -- tapping into alternative beta

• Investable indices are not created equal
• Hedge fund replication results are not very attractive
• Good investable hedge fund indices outperform replication models
• Are replication products only "average" hedge funds?

• Why replicate in the first place - the problems with hedge fund indices
• Factor exposures are backward looking
• The dangers of data-mining and over-fitting of data
• What are the limits to replication?

• How factor based models can provide daily liquidity and full transparency within an alternative beta allocation
• More accurate prediction of future returns thanks to adaptive learning abilities of the Kalman Filter
• Return simulations & portfolio applications
• How to get leveraged or short exposure to the alternative beta

• The FundCreator approach to synthetic fund creation
• Optimal diversification and the (sub-)zero correlation fund
• Hedge fund and hedge fund index returns without investing in hedge funds
• Robustness of the FundCreator procedure

A full one hour panel, giving delegates the opportunity to pick the brains of the world’s top academic hedge fund researchers and risk experts.

• Linear regression and large deviations
• Data mining and parameter over-fitting
• Out of sample cross-checks

• Applicability of linear factor replication to market neutral indices
• Separation of the Kat-Palaro replication process into distributional adjustments and correlation targeting
• Can replicas be used to build better portfolios?

• Pitfalls to avoid when specifying risk premium
• Human intervention vs. fully automatic replication. Adding alpha to the beta replication process?
• Minimizing model risk - Is the discussion of Non-Linear behaviour appropriate for the current replication products on offer?
• Why adding volatility to these products isn't the best approach to replication.
• Fee structures: what exactly are you replicating?

• Categorising the different approaches - strengths and weaknesses    
• Choice of vehicles
• Which product for which investor?
• What drives hedge fund replication expected returns?
• What happens when HFs fail to deliver returns or change their strategy?

• Identifying alternative beta in hedge funds
• How important are non linearity and time lag effects in analysing hedge fund risk?
• How can we properly integrate non-linear behaviour, correlation breaks under a market crisis and lagged impact within a structured framework?
• How can these concepts be used in portfolio construction and risk mitigation?

• Diversified exposure to the FX markets
• Optimised G10 index
• Portfolio approach

• Overview of all the academic studies
• New empirical evidence from 1996 to 2005 using the CISDM database
• Conclusion: are investors wasting their time searching for manager-specific alpha?

• Alternative and traditional beta 
• Omitted factors or alpha?
• Investor value - equity beta or orthogonality?
• Risk-level adjustment; stop loss levels versus fixed ex ante risk

• How should investors construct a diversified fund of alternative betas?
• Is HF replication helpful or should investors decide on the weightings to different risk factors?
• Are replication algorithms a useful tool in portfolio management?
• What role is there for packaged products?
• What fees should investors pay for alternative beta?

• Return-based style analysis
• Multifactor model based on sub-style HF indices 
• Fitted by selecting just the important sub-styles
• Identifying periods with persistent investment strategy

• What happens when investors understand alternative beta risk premia?
• Is HF replication a threat to the FOHF fees?
• Are hedge funds and mutual funds converging?
• Are replicable, non-alpha producing hedge fund strategies dead in the water?
• What are the implications for FOHF portfolios?
• Will alternative beta indices be used to benchmark and reward managers?

This “Risk Workshop” is tailored to the needs of institutional investors in hedge funds, including; funds of hedge funds, pension plan sponsors, large family offices, endowments and institutions, traditional multi-manager providers expanding into alternative investments, investment advisors and consultants.

Workshop participants will learn, from one of the industry’s most respected practitioners, sophisticated techniques for incorporating risk and liquidity issues into the investment process, with particular emphasis on the crucial issue of risk transparency.

Dr Raphael Douady, Founder & Head of Research,

Riskdata S.A.

Raphael Douady is one of the founders of Riskdata, the market-leading provider of risk management tools for investors, asset managers, hedge funds and funds of funds. With ten years experience in the banking industry (risk management, option models, trading strategies) and twenty years research in pure and applied mathematics, Dr Douady is renowned for his highly sophisticated quantitative solutions and statistical analysis. He created and teaches the New York University seminar of Mathematical Finance.  

• How to integrate uncertainty on expected future performance and liquidity problems within the portfolio construction process
• How to enhance the investment process using a risk budgeting framework

• For operational risk monitoring
• To feed an asset liability management process

• How can we assess an indicator’s reliability?
• Out of sample back testing