Hedge fund replication products

In 2007 an EDHEC study on passive hedge fund replication1 highlighted the inability of existing products to meet investors' needs for hedge fund replication. The factor replication approach fails to deliver accurate out-of-sample replication because of estimation errors and misspecification. Distribution replication fails to provide time series properties similar to those of hedge funds; doing so, in fact, is not an objective of the approach.

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For an idea of what asset managers think of hedge fund replication products, what they consider to be the appropriate method of hedge fund replication, and whether they use these products in their day-to-day business, the EDHEC Risk and Asset Management Research Centre, with the support of Newedge, carried out a detailed survey of asset managers and institutional investors.

This request for reactions had five multiple choice questions, with the option to add further comments. The

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