Hedge fund clones

Narayan Naik, Professor of Finance and Director of the Hedge Fund Centre, talks about the increasing popularity of synthetic hedge funds


In a new podcast Narayan Naik discusses whether investing in synthetic funds is a genuine alternative to the traditional hedge funds.

Synthetic hedge funds analyse the performance of traditional hedge funds and attempt to replicate that performance without a hedge fund manager, with associated lower fees.

Narayan likens the cloned funds to a plane with an autopilot function - investors should decide if the value added by having a ‘pilot' is worth more than the fees charged. The cloned fund also has the advantage of being less subject to human behavioural biases, and also offers more transparency and daily liquidity.

Narayan also discusses the factors that will influence demand for synthetic funds, and the steps involved in replicating a hedge fund strategy, and explains that synthetic hedge funds may perform better than traditional funds in the economic downturn.