Why a ‘Replication’ Strategy Trumps Liquid Alt Funds

Catch Andrew Beer interviewed on TheStreet.

The liquid alternatives movement is trying to bring hedge fund strategies to ordinary investors. Unfortunately, performance has been subpar for the majority of liquid alternative funds and the fees are still relatively high compared to the average mutual fund.

Andrew Beer, managing partner at Beachhead Capital Management, said a ‘replication strategy’ is the better option. ‘The idea is simple: figure out how hedge funds are invested, and copy it,’ said Beer, who also refers to his replication strategy as ‘Dynamic Beta’. Beer said even for sophisticated investors, it is difficult to figure out exactly what the best hedge fund managers are doing. He said the best replication strategies are intuitive and straightforward. ‘You should be able to look at the portfolio and have a clear idea of what’s driving performance,’ said Beer. ‘Lots of bells and whistles can look good, but they often come back to bite you and performance suffers. This is one case where simplicity is a virtue.’

June 14, 2016