Masters Theses


Sujit Subhash

Keywords and Phrases

Hedge fund replication


"Institutional investors and wealthy individuals have in the past allocated a significant portion of their portfolios to hedge funds with the expectation of unconditional and uncorrelated returns to the market. However, the financial crisis of 2008 has heightened investor sensitivity to the high fees, illiquidity, and lockup periods typically associated with hedge funds. Hedge fund indexes showing excellent returns and low volatility contain funds that are closed to new investments, while the performance of investable funds have been shown to be inferior to their non-investable counterparts. The lack of transparency and extreme variation in the performance of hedge funds make the due diligence process critical in selecting the right fund. These challenges have motivated a search for an alternative to hedge funds. Recent research has established that a significant part of hedge fund returns can be replicated by portfolios constructed using liquid financial instruments. Hedge fund replication products, or clones, answer several challenges faced by hedge fund investors by providing daily liquidity, easy monitoring, and complete transparency at a significant cost advantage to hedge funds. This thesis examines the performance of clones constructed with factors selected based on the economic relevance to each hedge fund strategy by using both a passive model with constant portfolio weights, and an active model requiring monthly rebalancing of portfolio weights. These clones are further compared against the top performing hedge funds to analyze if the clones continue to deliver against a higher benchmark with regard to both risk and return"--Abstract, page iv.


Enke, David Lee, 1965-

Committee Member(s)

Dagli, Cihan H., 1949-
Qin, Ruwen


Engineering Management and Systems Engineering

Degree Name

M.S. in Engineering Management


Missouri University of Science and Technology

Publication Date

Fall 2014


ix, 62 pages

Note about bibliography

Includes bibliographical references.


© 2014 Sujit Subhash, All rights reserved.

Document Type

Thesis - Open Access

File Type




Subject Headings

Hedge funds
Hedge funds -- Decision making -- Mathematical models
Investments -- Management
Exchange traded funds -- Mathematical models
Regression analysis

Thesis Number

T 10597

Electronic OCLC #