@article {Bollen80, author = {Nicolas P.B. Bollen and Gregg S. Fisher}, title = {Send in the Clones? Hedge Fund Replication Using Futures Contracts }, volume = {16}, number = {2}, pages = {80--95}, year = {2013}, doi = {10.3905/jai.2013.16.2.080}, publisher = {Institutional Investor Journals Umbrella}, abstract = {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}, issn = {1520-3255}, URL = {https://jai.pm-research.com/content/16/2/80}, eprint = {https://jai.pm-research.com/content/16/2/80.full.pdf}, journal = {The Journal of Alternative Investments} }