Assessing AlphaClone’s first year running virtual funds of hedge funds.
AlphaClone launched in 2008 with an ambitious idea: allow everyday investors to copy hedge fund returns without the high fees. By piggybacking on the publically disclosed stock investments of Baupost’s Seth Klarman, SAC Capital Advisor’s Steve Cohen, Tiger Global’s Chase Coleman and nearly 300 hedge funds and other money managers, the San Francisco firm sought to give everyone access to the masters.
Besides research tools, the firm offers a variety of separate account strategies, charging flat management fees of 1% to 1.5% of assets. Those accounts allow clients to invest alongside managers practicing particular equity strategies, such as one, Value Masters, that derives its holdings from 15 undisclosed value fund portfolios.
In its first full year of trading, AlphaClone’s accounts produced net returns that came close to those of the managers they tracked, even if it was a year in which hedge funds produced their worst showing since 2008.
AlphaClone Select, an account which selects its holdings from the managers for which it has historically proved the most profitable to copy, was down 6.8% in 2011, compared to a 7.4% loss for the Dow Jones Credit Suisse Core Equity Long/Short Index—the firm’s preferred benchmark. The HedgeFund Intelligence Composite Indexof hedge fund returns fell 1.94% in 2011 (data is still being updated as funds report). The Value Masters portfolio fell 2.7% in 2011, compared with a 2.3% gain for the S&P 500 (with dividends).Activist Masters, which picks its stocks from 13 activist funds, gained 7.4% for the year. The HedgeFund Intelligence Event Driven Index fell 4.50% in 2011.
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