Credit Suisse forms partnership with academics to further hedge fund replication techniques
Credit Suisse has announced the establishment of a research partnership between its beta strategies group and professors William Fung, David Hsieh and Narayan Naik, academic leaders in the areas of hedge fund replication and alternative beta research.
The beta strategies group is Credit Suisse's fiduciary quantitative index platform and part of the funds and alternative solutions business within the bank's asset management division.
Fung, Hsieh and Naik are regarded as pioneers in the fields of alternative beta and hedge fund replication, having explored these topics from an academic perspective since 1994. Fung serves on the boards of various financial services companies and is visiting research professor of finance at the BNP Paribas Hedge Fund Centre at the London Business School.
Hsieh is the Bank of America professor of finance at the Fuqua School of Business at Duke University, while Naik is professor of finance and director of the BNP Paribas Hedge Fund Centre in London.
Under the partnership, Credit Suisse and Fung, Hsieh and Naik will focus on research in support of ongoing development of alternative beta models designed to replicate the risk and return characteristics of hedge fund strategies and identification of alternative risk premiums.
The new alternative beta models are intended to enhance Credit Suisse's quantitative replication platform capabilities. Because the strategies will be executed through liquid securities such as futures, options and exchange-traded funds, access to the risk and return profile of hedge fund strategies may be achieved with full transparency and high levels of liquidity.
'Our group has a longstanding tradition of providing clients with thought leadership and innovative investment solutions,' says Steve Smith, head of Credit Suisse's funds and alternative solutions business. 'Clients are seeking transparent investment methodology, increased liquidity and costs in line with existing alpha and beta products.'
Oliver Schupp, head of Beta Strategies, adds: 'Institutional investors demand a detailed understanding of the return sources in their portfolios and are willing to substitute alternative beta factors through cost-effective replication strategies. This new investment approach may ultimately allow investors tactically to adjust their portfolios to lower the expense ratio, enhance liquidity, hedge long positions and obtain a desired correlation.'
Says Fung: 'Credit Suisse has been a leading provider of hedge fund benchmarks for many years. It has tremendous insight into the underlying factors that drive a broad array of hedge fund strategies' performance. Its experience in managing quantitative hedge fund portfolios makes it an ideal partner to take the concept to the next level.'
Credit Suisse has a proprietary database of more than 5,000 hedge funds in its indexing business and experience in managing hedge fund portfolios since 1998.
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