Synthetic Hedge Funds

25 Pages Posted: 16 Feb 2016 Last revised: 15 Jun 2016

See all articles by Mario Fischer

Mario Fischer

Technische Universität München (TUM)

Matthias X. Hanauer

Technische Universität München (TUM); Robeco Asset Management

Robert Heigermoser

Technische Universität München (TUM) - Department of Financial Management and Capital Markets; Technische Universität München (TUM), Students

Date Written: February 16, 2016


We provide evidence on the performance and the replication success of a broad sample of 72 synthetic hedge funds from January 2009 to December 2013. Thereby, we assign the term 'synthetic hedge fund' to mutual funds and exchange-traded funds with hedge fund indices as their benchmarks. Replication success is measured through different perspectives from distributional characteristics to risk-adjusted performance. We find an overall significant underperformance of synthetic hedge funds compared to an appropriate benchmark index. Furthermore, mutual funds (associated with active portfolio management) can produce return characteristics closer to hedge fund benchmarks than exchange-traded funds (associated with passive management). From a single strategy perspective, we find a picture of heterogeneity. Regarding the market environment, we show larger return differences for unusual market conditions than for regular ones.

Keywords: Clone, Hedge Fund Clones, Hedge Fund, Synthetic Hedge Funds, Indexing, Replication

JEL Classification: G11, G12, G14

Suggested Citation

Fischer, Mario and Hanauer, Matthias Xaver and Heigermoser, Robert and Heigermoser, Robert, Synthetic Hedge Funds (February 16, 2016). Review of Financial Economics, Forthcoming, Available at SSRN: or

Mario Fischer

Technische Universität München (TUM) ( email )

Arcisstrasse 21
Munich, DE 80333

Matthias Xaver Hanauer

Technische Universität München (TUM) ( email )

Arcisstr. 21
Munich, D-80290


Robeco Asset Management ( email )

Weena 850
Rotterdam, 3014 DA


Robert Heigermoser (Contact Author)

Technische Universität München (TUM), Students ( email )

Munich, 80333

Technische Universität München (TUM) - Department of Financial Management and Capital Markets ( email )

Munich, 80333

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