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EDHEC-Risk Executive Education

Alternative Betas & Hedge Fund Replication Seminar

16 October, 2007 - Grand Hyatt, New York

Measuring, Optimizing, and Replicating Hedge Fund Betas

Empirical research shows that exposure to fundamental sources of risk rather than sheer talent is the main force driving hedge fund returns. Under the impetus of institutionalization, heroic tales of alpha generation have given way to scientific assessment of the beta characteristics of hedge funds, and "passive" forms of alternative investment have started to emerge. To adapt to this new paradigm, fund managers, investors and advisors need to identify, measure and optimize the beta benefits of hedge funds and to evaluate the merits and limits of indices and replication offers.

Fuelled by massive investments on the part of funds of funds and institutions, hedge funds have grown from a cottage industry catering to the needs of private wealth to a trillion dollar business in which over 10,000 managers vie for the attention of global institutional investors. The significance of alternative investments within institutional portfolios is imposing new responsibilities and challenges upon hedge funds, funds of funds and investors.

Formerly presented as alpha add-ons, hedge funds are increasingly accepted as indispensable portfolio building blocks on the strength of their beta characteristics. In this environment, successful players will be those who are able to advise investors on how to optimally incorporate alternative investments into their core and satellite portfolios.

While investable hedge fund indices have been around since 2002, the current wave of alternative beta trackers is presented as marking a new milestone in the institutionalization of the industry. Cloning initiatives are meant to enable investors to achieve returns similar to those of hedge funds with significantly lower fees through investment in rules-based replication strategies involving liquid underlying assets. A typical hedge fund clone attempts to track the systematic factor exposure in hedge fund returns rather than generate alpha.

Evidence that performance of the average hedge fund is explained mainly by dynamic exposure to risk factors means that a disciplined approach to beta management is called for. It also suggests that alternative managers who want to thrive along investable indices and hedge fund clones need to understand the merits and limits of replication techniques and to deliver added-value by optimizing the beta benefits of hedge funds within asset management and ALM solutions.

Designed by a leading expert in the theory and practice of hedge fund investing, this intensive seminar equips participants with a workable knowledge of the state of the art techniques for identifying, measuring and optimizing hedge fund benefits both at the fund level and for end investors.

Presented in a highly accessible manner and drawing on the latest results of the alternative investment research conducted within the EDHEC Risk and Asset Management Research Centre, the Alternative Betas and Hedge Fund Replication seminar is designed for fund of hedge funds managers, investment officers and administrators working for institutional investors, and consultants and key account representatives advising high net worth investors and institutions on hedge fund matters.

Professor Lionel Martellini will present a novel approach to hedge fund investing and detail the associated techniques for identifying, measuring, and optimizing the beta benefits of hedge funds. Since these methods are compatible with the core-satellite model and can be implemented within an Asset-Liability Management framework, the seminar will prove particularly relevant for managers and advisers catering to the needs of institutional investors.

Featuring an in-depth discussion of hedge fund cloning techniques, introducing the results of independent tests of alternative beta replication, and suggesting directions for the next generation of index trackers, the seminar should also appeal to practitioners interested in emerging forms of liquid and “passive” alternative investment.

  • What are the alpha and beta benefits of hedge fund investing?

  • How to identify, measure, and maximize the beta benefits of hedge funds

  • How to select hedge fund strategies and take into account higher moments to achieve optimal diversification

  • What are the benefits of hedge funds in an ALM framework?

  • How can hedge funds be used as optimal substitution vehicles?

  • How to implement dynamic management of the alpha and beta risk budgets

  • How to analyse the diversity of hedge fund replication offers

  • Can synthetic hedge fund products deliver and what is there to be learned from hedge fund cloning techniques?

  • What are the implications of alternative beta trackers for hedge funds, funds of funds, and end-investors?

  • How to package hedge fund alphas and betas for institutional investors

Seminar Leader:

Lionel Martellini is Professor of Finance at EDHEC Business School and the Scientific Director of the EDHEC Risk and Asset Management Research Centre.

Recent centre production co-authored by Lionel Martellini includes: The Myths and Limits of Passive Hedge Fund Replication, The Benefits of Hedge Funds in ALM, Investing in Hedge Funds: Adding Value through Active Style Allocation Decisions, and Hedge Fund Indices: Reconciling Investability and Representativity.

He has served as a consultant for various institutional investors, investment banks and asset management firms both in Europe and in the United States on questions related to risk management, alternative investment strategies, and asset allocation decisions in the absence and in the presence of liability constraints and performance benchmarks.

His research has been published in leading academic and practitioner journals including Management Science, The Review of Financial Studies, European Financial Management, Financial Analysts Journal, and Risk. He sits on the editorial board of the Journal of Portfolio Management and the Journal of Alternative Investments.

Lionel has co-authored and co-edited reference texts on fixed-income management and contributed to eight books on portfolio construction, risk management, fixed income securities, hedge funds, and commodity trading advisors. He is regularly invited to deliver presentations at leading academic and industry conferences.

Prior to joining EDHEC Business School in 2003, Lionel Martellini was a faculty member at USC Marshall School of Business.

He holds graduate degrees in business administration, economics, statistics and mathematics, as well as a PhD in Finance from the Haas School of Business at UC Berkeley.

EDHEC's survey:
"The Myths and Limits of Passive Hedge Fund Replication":

Each participant will receive a printed copy of EDHEC’s hedge fund replication survey by Noël Amenc, Walter Géhin, Lionel Martellini and Jean-Christophe Meyfredi.

The study may be purchased separately at a cost of $1,000 per copy.

CFA Institute Professional Development (PD) Program:

EDHEC Asset Management Education is registered with CFA Institute as an Approved Provider of professional development programs. This program is eligible for 7 PD credit hours as granted by CFA Institute. If you are a CFA Institute member, PD credit for your attendance at this event will be automatically recorded in your PD Diary.

  • Attendance fees for the seminar amount to $1,500.
  • Fees include documentation, refreshments, lunch and drinks.

Two easy ways to register:


Grand Hyatt New York
109 East 42nd Street at Grand Central Station
New York