Alternative Beta Strategies and Hedge Fund Replication - Hardcover

Lars Jaeger; Jeffrey Pease

Hardcover

ISBN 10: 047075446X ISBN 13: 9780470754467

Publisher: John Wiley & Sons, 2008

Synopsis

There s a buzzword that has quickly captured the imagination of product providers and investors alike: "hedge fund replication". In the broadest sense, replicating hedge fund strategies means replicating their return sources and corresponding risk exposures. However, there still lacks a coherent picture on what hedge fund replication means in practice, what its premises are, how to distinguish di erent approaches, and where this can lead us to.

Serving as a handbook for replicating the returns of hedge funds at considerably lower cost, Alternative Beta Strategies and Hedge Fund Replication provides a unique focus on replication, explaining along the way the return sources of hedge funds, and their systematic risks, that make replication possible. It explains the background to the new discussion on hedge fund replication and how to derive the returns of many hedge fund strategies at much lower cost, it differentiates the various underlying approaches and explains how hedge fund replication can improve your own investment process into hedge funds.

Written by the well known Hedge Fund expert and author Lars Jaeger, the book is divided into three sections: Hedge Fund Background, Return Sources, and Replication Techniques. Section one provides a short course in what hedge funds actually are and how they operate, arming the reader with the background knowledge required for the rest of the book. Section two illuminates the sources from which hedge funds derive their returns and shows that the majority of hedge fund returns derive from systematic risk exposure rather than manager "Alpha". Section three presents various approaches to replicating hedge fund returns by presenting the first and second generation of hedge fund replication products, points out the pitfalls and strengths of the various approaches and illustrates the mathematical concepts that underlie them.

With hedge fund replication going mainstream, this book provides clear guidance on the topic to maximise returns.

About this title

About the Author

Lars Jaeger holds a PhD degree in theoretical physics from the Max-Planck Institute for Physics of Complex Systems, Dresden. He studied physics and philosophy at the University of Bonn, Germany, and ??cole Polytechnique, Paris. After his post-doctorate studies in Dresden, Lars began his finance career as a quantitative researcher on econometric and mathematical modeling of financial markets at Olsen & Associates AG in Zurich. He subsequently joined the Hedge Fund group of Credit Suisse Asset management, where he was responsible for risk management and quantitative strategy analysis. Lars is a founding partner of saisGroup, an investment firm specializing on alternative investment strategies which in 2001 merged with Partners Group, where he is now a partner heading the group ???Alternative Beta Strateges???. Lars holds the CFA charter and is a certified Financial Risk Manager (FRM). He is the author of numerous research publications and the books Risk Management of Alternative Investment Strategies, published in 2002 with Financial Times Prentice Hall, The New Generation of Risk Management for Hedge Funds and Private Equity (ed.) published by Euromoney in 2003, and Through the Alpha Smokescreen: A guide to hedge fund return sources, published by Institutional Investors (2005). Lars lives with his wife and three children near Zurich, Switzerland.

From the Back Cover

A new buzzword is out and has quickly captured the imagination of product providers and investors alike: ???hedge fund replication???. In the broadest sense, replicating hedge fund strategies means replicating their return sources and corresponding risk exposures. However, there still lacks a coherent picture on what hedge fund replication means in practice, what its premises are, how to distinguish different approaches, and where this will lead.

Serving as a handbook for replicating the returns of hedge funds at considerably lower cost, Alternative Beta Strategies and Hedge Fund Replication provides a unique focus on replication, explaining along the way the return sources of hedge funds, and their systematic risks, that make replication possible. It explains the background to the new discussion on hedge fund replication and how to derive the returns of many hedge fund strategies at much lower cost, it differentiates the various underlying approaches and explains how hedge fund replication can improve your own investment process into hedge funds.

Written by the well known Hedge Fund expert and author Lars Jaeger, the book is divided into three sections: Hedge Fund Background, Return Sources, and Replication Techniques. Section one provides a short course in what hedge funds actually are and how they operate, arming the reader with the background knowledge required for the rest of the book. Section two illuminates the sources from which hedge funds derive their returns and shows that the majority of hedge fund returns derive from systematic risk exposure rather than manager ???Alpha???. Section three presents various approaches to replicating hedge fund returns by presenting the first and second generation of hedge fund replication products, points out the pitfalls and strengths of the various approaches and illustrates the mathematical concepts that underlie them.

With hedge fund replication going mainstream, this book provides clear guidance on the topic that has the potential to turn the hedge fund industry upside down.

From the Inside Flap

It was around early 2002 when Lars Jaeger and I started exchanging ideas about distinguishing between hedge fund alphas and hedge fund betas as different sources of performance. Hitherto, most hedge fund return models were rooted in performance attribution literature. The notion of a rule-based approach to investing into a portfolio of hedge fund strategies, such as investable hedge fund indices, was not much more than a germ of an idea. Lars seven-year journey, from embracing the concept of alternative beta to persuading the investment community that this represents an efficient avenue for achieving hedge fund-like returns, is a tour de force. This book offers the reader valuable insight into the thinking behind this landmark development in hedge fund research.

Bill Fung, Visiting Research Professor of Finance, Hedge Fund Research Centre, London Business School.

Edition details

• Publisher: John Wiley & Sons
• Publication date: 2008
• Language: English
• ISBN 10: 047075446X
• ISBN 13: 9780470754467
• Binding: Hardcover
• Number of pages: 272