Are hedge fund clones attractive financial products for investors?

Abstract

The subprime crisis, which proved devastating for the hedge fund industry, induced significant losses for investors who ploughed into absolute return funds. In such a context, investigating the opacity surrounding the hedge fund industry and its prohibitive fee structure is of real interest as, within the context of the Madoff scandal, there is strong evidence of a reduction in investor confidence. On the other hand, investors are still looking for attractive returns. Hedge fund clones therefore appear to offer a promising solution as they seek to replicate hedge fund returns at lower fees and with more transparency and liquidity.

Keywords:

• hedge fund replication
• subprime crisis
• hedge fund clones
• risk

JEL Classification:

• G10
• G23