Another hedge fund clone

Escrito el 16 abril 2007 por Juan Toro en Financial Markets

Bearn Stearns has launched what it supposed to be the first Hedge Fund clone for individual strategies within the fixed income arena. The name of the clone is MAST and trades back and forth the spread of the two swap spread against the ten years swap spread. Entry and exit level are described very succinctly in terms of some moving average crossovers. For the 10 years period of the back test they have reported a return of 5,1 per cent over Euribor after fees and with a Sharpe ratio of 1,76. That is not bad performance and the return to risk ratio is pretty good.

This will probably stimulate others to follow. Some say that the clone industry will mimic the boom of the ETFs (Exchange Traded Funds). In the fixed income universe the set of individual strategies that can be cloned are numerous though it is hard to see whether past returns can be replicated. The reason is that the volatility in fixed income is currently too small to guarantee returns obtained in the 90s. The back testing period of Bearn Stearns


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