Hedge Fund Beta Replication: A Five-Year Retrospective

Journal of Investment Management (JOIM), Third Quarter 2014

Posted: 16 Nov 2014

See all articles by Peter Lee

Peter Lee

Independent

Andrew W. Lo

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

Date Written: October 14, 2014

Abstract

During the past few years, hedge fund beta replication strategies have become more common. At the same time, questions about the relevance, performance, and applicability of these strategies have been raised in response to the rapidly shifting landscape in the hedge fund industry. We present a review of the growing beta replication industry with particular emphasis on the ASG Global Alternatives Fund. We discuss the motivation for its existence and the logic of its absolute and relative performance over time and across different market environments. We also explain why these strategies are complements to, and not substitutes for, direct investments in hedge funds, and provide examples of their value-added in investors’ portfolios.

Keywords: Hedge funds, liquid alternatives, beta replication, exotic beta, smart beta

JEL Classification: G00

Suggested Citation

Lee, Peter and Lo, Andrew W., Hedge Fund Beta Replication: A Five-Year Retrospective (October 14, 2014). Journal of Investment Management (JOIM), Third Quarter 2014. Available at SSRN: https://ssrn.com/abstract=2510160

Peter Lee

Independent ( email )

Andrew W. Lo (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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Cambridge, MA 02138
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Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

Stata Center
Cambridge, MA 02142
United States

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