RT Journal Article
SR Electronic
T1 Send in the Clones? <em>Hedge Fund Replication Using Futures Contracts</em>
JF The Journal of Alternative Investments
FD Institutional Investor Journals
SP 80
OP 95
DO 10.3905/jai.2013.16.2.080
VO 16
IS 2
A1 Nicolas P.B. Bollen
A1 Gregg S. Fisher
YR 2013
UL https://pm-research.com/content/16/2/80.abstract
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