Clones will rule the world some day; this prediction may not seem in sight for humans, but it looks like hedge fund clones have mastered the art of replicating and mimicking returns. AlphaClone’s funds enable investors to put their money in the same ideas as the hedge fund titans do. There is of course nothing original about cloning a portfolio based on the top holdings of large funds, but then isn’t everybody waiting for new investment thesis from these influential investors just so they can also replicate it.
Speaking of AlphaClone, the fund has done more than well for itself with four out of six main strategies returning greater than 20 percent in 2012. Not only that, the cloning strategy also lives up to its name by projecting almost similar returns as its ‘parent’ fund. Take the example of Dan Loeb’s Third Point Ultra Fund that returned 22.1 percent through October 2012, while the fund’s twin at AlphaClone returned 20.9 percent through November. The Visium Global Offshore Fund returned 21.5 percent through November 2012, while its clone was several steps ahead with a performance of 26 percent. Overall Alphaclone’s Long/Short Composite Strategy returned 18 percent till November 2012.
AlphaClone has been equally successful in managing its clones of the top 10 holdings of some of the largest hedge funds. Clones of biotech investment funds, DAFNA Capital Management and Ridgeback Capital, each returned 85 and 81 percent respectively, with single holdings gaining as much as 304 percent in last year. The best cloned biotech investments have been Threshold Pharmaceuticals, Inc. (NASDAQ:THLD), Pharmacyclics, Inc. (NASDAQ:PCYC), YM BioSciences Inc. (USA) (NYSEAMEX:YMI) (TSE:YMI), Regeneron Pharmaceuticals Inc (NASDAQ:REGN) and Santarus, Inc. (NASDAQ:SNTS)
The clone of Second Curve Capital, a tiger cub, returned a staggering 62 percent in last year. The best performing investments of the financials focused fund have been in Taylor Capital Group Inc (NASDAQ:TAYC), Citizens Republic Bancorp, Inc. (NASDAQ:CRBC), Mercantile Bank Corp. (NASDAQ:MBWM), Primus Guaranty, Ltd. (PINK:PRSG) and Banner Corporation (NASDAQ:BANR).
AlphaClone of Fortress Investment Group LLC (NYSE:FIG)’s top ten holdings returned 53 percent, with highest performance in Nationstar Mortgage Holdings Inc (NYSE:NSM), Tesoro Corporation (NYSE:TSO) and Rail America after it was acquired by Genesee & Wyoming Inc. (NYSE:GWR).
AlphaClone also has replicas of King Street Capital, Tepper’s Appaloosa Management and Chou & Associates, these clones returned in the range of 45-50 percent. The winning positions were US Airways Group, Inc. (NYSE:LCC), Citigroup Inc. (NYSE:C), MGIC Investment Corp. (NYSE:MTG), Mpg Office Trust Inc (NYSE:MPG) and Sprint Nextel Corporation (NYSE:S).
