Alternative Beta Strategies and Hedge Fund Replication

Lars Jaeger

Preface ix

1 Breaking the Black Box 1

2 What Are Hedge Funds, Where Did They Come From, and Where Are They Going? 7

3 The Individual Hedge Fund Strategies’ Characteristics 37

4 Empirical Return and Risk Properties of Hedge Funds 83

5 The Drivers of Hedge Fund Returns 117

6 A First Approach to Hedge Fund Replication – Linear Factor Models and Time Series Replication Models 157

7 The Distributional Approach 183

8 Bottom up: Extraction of Alternative Beta and ‘Alternative Beta Strategies’ 191

9 Hedge Fund Portfolio Management with Alternative Beta Strategies 213

10 Replication and the Future of Hedge Funds 239

References and Bibliography 245

Index 253