PT - JOURNAL ARTICLE AU - Nicolas P.B. Bollen AU - Gregg S. Fisher TI - Send in the Clones? <em>Hedge Fund Replication Using Futures Contracts</em> AID - 10.3905/jai.2013.16.2.080 DP - 2013 Sep 30 TA - The Journal of Alternative Investments PG - 80--95 VI - 16 IP - 2 4099 - https://pm-research.com/content/16/2/80.short 4100 - https://pm-research.com/content/16/2/80.full AB - Replication products strive to offer investors some of the benefits of hedge funds while avoiding their high fees, illiquidity, and opacity. The authors of this article test whether a replication algorithm can deliver the diversification and high Sharpe ratio that investors seek. Their procedure constructs monthly clone returns out-of-sample using fully collateralized futures positions held for one-month, with position sizes determined using rolling window regressions. Clone returns have high correlation with their hedge fund targets, indicating replication is possible. Clones also have high correlation with a buy-and-hold investment in stocks, however, and neither the targets nor their clones demonstrate successful time variation in factor loadings.TOPICS: Real assets/alternative investments/private equity, futures and forward contracts, statistical methods, performance measurement