Andrew Beer & Adam Butler - Attack of the Managed Futures Clones
Flirting with Models
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Replicating an Index for Broad-Based Exposure to the Hedge Fund Industry
In this chapter, they discuss the implementation process for replicating an index and building a portfolio. They highlight the efficacy of using a smaller set of factors or markets to achieve a high degree of correlation. They also emphasize the power of an ensemble approach, where combining signals from different models outperforms individual models. They mention the historical skepticism around replication but highlight its success over the years. They compare the cost-effectiveness of replication to other strategies and provide a track record of their own outperformance. Overall, they encourage investors to consider replication for broad-based exposure to the hedge fund industry.
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