The rise of replication
Hedge fund replication was the talk of financial markets at the end of last year. Sadly, confusion about what the strategy entails, plus inaccurate media reports, left many investors scratching their heads. But Daniel Sheehan finds that hedge fund clones could present exciting opportunities for structured products marketers
US investment bank Goldman Sachs and rival Merrill Lynch created something of a buzz in financial markets at the end of 2006 when they unveiled their hedge fund replication strategies. At the time, it was widely reported that replication strategies could present a threat to direct investment into hedge funds. Both banks say this is untrue, but they believe replication is an important leap forward for structured products creation.
Replication models effectively say that historical hedge fund
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