Alternative Beta articles in the press

• HEDGEWORLD 13 Feb 2007, Replicators Up Pressure on Manager Fees
LONDON (HedgeWorld.com)—Everyone agrees that alpha is like gold dust and perhaps even harder to find. That essential truth helps to underline why about 300 delegates from pension funds, investment banks and consultants, crowded into the Landmark Hotel in Marylebone Monday and Tuesday (Feb. 12, 13) to hear from the leading advocates of hedge fund replication and alternative beta at an event produced by IRC Conferences. Click here to read on

• Daily News, USA, 13 Feb 2007, JP Morgan Debuts Replication Index
The hedge fund replication craze continues to spread among investment banks. JP Morgan announced today [Feb. 12] the launch of its Alternative Beta Index (ABI) at a conference in London dubbed Hedge Fund Replication and Alternative Beta. Click here to read on

• All about Alpha 13 Feb 2007, Flying Dutchman Portends Doom for Hedge Fund Industry
http://www.allaboutalpha.com
The Flying Dutchman is a legendary ghost ship that is believed to be a sign of imminent doom for mariners.  This fact is surely not lost on Dutchman Harry Kat, who today flew into London’s Landmark Hotel and launched a blistering attack on hedge funds at major hedge fund conference - questioning the industry’s very existence. Click here to read on

• All about Alpha 13 Feb 2007; Merrill Lynch’s Hedge Fund Replication to Go Mass Market
http://www.allaboutalpha.com
Ben Bowler and Steven Umlauf of Merrill Lynch weren’t going to let JPMorgan’s Lakshmi Seshadri steal the show with her hedge fund replication offering yesterday.

• All about Alpha 13 Feb 2007; Jaeger: Hedge Funds Usher in “Atomic” Age of Investing
http://www.allaboutalpha.com
You don’t need a Ph.D. in physics to understand hedge fund replication. But Lars Jaeger has one just in case. And he used it masterfully today to draw an analogy between the model of the atom in the 19th century (a random mass of various particles) and the common paradigm understood today including a nucleus (containing most of the atom’s mass) and a number of electrons orbiting it. Click here to read on

• All about Alpha, 12 February 2007 - Movie Stars, Super Models, and Alternative Beta
http://www.allaboutalpha.com
The worlds of filmmaking, fashion and finance converge on London this week. Dame Helen Mirren was crowned queen of the world at last night’s BAFTA awards (Britain’s Oscars), London Fashion Week has flooded this city with (highly controversial) size-zero models, and Professor Bill Fung presides over IRC’s “Hedge Fund Replication and Alternative Beta” conference today. Click here to read on

• HEDGEWEEK Fri, 09 Feb 2007, Merrill Lynch launches volatility arbitrage index to replicate hedge strategy
Merrill Lynch has launched a volatility arbitrage index that seeks to replicate the returns of an S&P 500 volatility arbitrage strategy employed by many actively managed hedge funds. The creation of the index is seen as paving the way for investible products such as exchange-traded funds that track hedge fund performance. Click here to read on

• Jaeger: Replication strategies may account for 40% of managed hedge fund assets next 5 years - From Dailyii.com 15/1/7
In the next half decade, hedge fund replication strategies may account for 40% of managed HF assets, and the drive in that direction is likely to take hold this year. Click here to read on

• New Index Trackers Use Hedge Funds As Investing Guide, from the Wall Street Journal, 27/12/2006
 Firms such as Merrill Lynch & Co. and Goldman Sachs Group Inc. and a professor at Cass Business School in London have introduced strategies that can be used to track hedge funds or some of the strategies they use -- in effect, offering a passive way to get hedge-fund returns. Click here to read on

• Hedge Funds: Attack of the Clones, BusinessWeek, 5 December 2006
Merrill and Goldman have unveiled index-based products that offer hedge fund exposure at a fraction of the cost. But big-money HF managers shouldn't worry yet. The exotic world of hedge funds may soon look a little more "plain vanilla." Financial companies have recently begun introducing index-based tools that would provide investors with hedge fund exposure for significantly less than hedge fund prices.

• Goldman sets up hedge fund clone, by Steve Johnson, Financial Times Published: Dec 3 2006
Goldman Sachs has become the first bank to create a hedge fund replication tool in a move that could lead to a shake-up of the $1,300bn hedge fund industry.The platform will greatly undercut the notoriously high fees of the hedge fund sector.  Click here to read on

• Harry Kat and the Art of Replicating Hedge Fund Performance, from www.seekingalpha.com 30/11/2006
There was a lot of press coverage this past week on City University London's Professor of Risk Management and Director of the Alternative Investment Research Centre at the Cass Business School Harry Kat and his recently published papers on replicating hedge fund performance by way of trading futures contracts. Click here to read on

• Hedge-Fund Returns Can Be Matched Without Fees, Professor Says , By Adrian Cox, Nov. 28 (Bloomberg)
Hedge-fund investors could earn greater returns at a fraction of the cost, according to research by Cass Business School Professor Harry Kat, who designed software to automatically mimic funds' trading profits. Click here to read on

• Computers 'will replace hedge fund managers'  Financial News - 28 Nov 2006
The hedge fund industry is set for a move away from active fund management according to a new report because automated trading systems can outperform real managers. Professor Harry Kat and colleague Helder Palaro from Cass Business School claim to have designed systems that would have outperformed real managers 82% of the time over the past 15 years.  Click here to read on

• Replication is the new buzzword, By Steve Johnson Financial Times,Published: November 20 2006
Hedge fund managers have had a ball in recent years, with fund inflows and salaries rising in unison as desperate investors part with generous fees. But is the party about to come to an end for many of the managers who jumped on the hedge fund bandwagon? Click here to read on

• Matthias Knab daily Opalesque newsletter November 16, 2006
Five finance professors to examine new proposed academic hedge fund paradigm `Hedge fund return = traditional beta + alternative beta + alternative alpha`, implications to industry at London `Alternative Beta` event
The hedge fund industry is slowly beginning to acknowledge that a large part of its returns arise due to common “risk factors” rather than pure manager skill, i.e. from “alternative beta” rather than alpha. 

• Matthias Knab daily Opalesque newsletter November 13, 2006
Dow Jones Indexes is in talks to launch the world's first investable index trackers designed to mimic the behaviour of a range of hedge fund strategies. The artificial trackers would potentially allow investors to access the returns of hedge funds without having to pay the high fees demanded by the industry, typically a 2 per cent annual fee and a 20 per cent performance fee. If successful, the initiative would pose a threat to hedge funds that merely generate the beta of their chosen trading strategy without generating sufficient alpha to justify their high fee structure.

• The Economist - October 26th "Send in the Clones"
HEDGE funds profit handsomely from their mystique. The typical client imagines they generate lots of money, doesn't know quite how they do it, and is willing to pay their high fees as a result. But some academics now think it is possible to make cheap, knock-off versions of these expensive originals. Perhaps you can get Saks Fifth Avenue products at street-market prices.

• Taking the ego out of hedge fund investing, Chicago Tribune - October 29th, Gail MarksJarvis
Imagine hedge funds without brainy managers maneuvering artfully through short-lived market opportunities day in and day out. You might think the flashy hedge-fund arena could never evolve into this. But with about $1.2 trillion in assets, the industry is maturing. And as it does, analysts are looking for ways to capture the advantages of hedge funds without the tremendous fees and egos that go with the territory.

• Opalesque - October 19th - Merrill Lynch: Rules-based passive hedge fund strategies could provide increasingly attractive alternative to active hedge fund management
Rules-based passive hedge fund strategies could provide an increasingly attractive alternative to active hedge fund management as the industry continues to mature according to Merrill Lynch (MER) analysts. They expect strategies will increasingly emerge that aim to replicate hedge fund performance – either by using liquid assets like stocks or by mechanically executing hedge fund strategies – enabling investors to achieve similar returns to hedge funds with lower fees. Investors in such instruments may also benefit from greater liquidity and transparency.