Hedge Fund Replication

An active approach to passive investing in the alternative arena while maintaining transparency and liquidity in a cost-effective manner.

  • Hedge Fund Replication

    Commerce Asset Management manages two hedge fund replication strategies, Equity Hedge and Composite.

    Both strategies are designed to replicate the hedge fund returns streams as defined by HFR, Inc, the most widely recognized hedge fund database provider and standard in the industry. CAM combines its investment professionals’ years of hedge fund experience in its fundamental analysis of the index constituents along with CAM’s quantitative expertise to create diversified portfolios of liquid instruments that closely track the monthly returns of the target benchmark indices. The portfolios are actively managed and rebalanced at least monthly. The fundamental and quantitative analyses are continually monitored as the target indices are not static with index constituents changing as well as the underlying portfolios being actively managed.

    We believe that investing in CAM’s replication strategies allows investors to access alternative return streams without expending the required time, effort, resources, costs and frustrations that come with attempting to build portfolios of hedge funds. The liquidity and transparency of CAM’s replication strategies also provide the benefits of easy valuation and access to capital.

     

    • Separately Managed Accounts
      • Equity Hedge and Composite Strategies
      • HFRI Equity Hedge (Total) Benchmark
      • HFRI Fund Weighted Composite Benchmark
      • Full Transparency
      • Non Investable Indices
      • $5 Million Minimum
      • 0.75% Management Fee
    • Insurance Dedicated Funds
      • Equity Hedge Strategy (currently)
      • CAM Equity Hedge Insurance Fund (private placement)
        • $250,000 minimum
        • Monthly Liquidity
      • CAM Hedge VIT Fund
        • Daily Liquidity
      • HFRI Equity Hedge (Total) Benchmark
      • Full Transparency
      • Tax Preferenced
      • Non Investable Index
      • 1.65% Expense Ratio
  • The CAM Equity Hedge Liquid Strategy's philosophy believes in the power of grouped intelligence managing unconstrained portfolios.  The Strategy attempts to gain net aggregate exposures that are contained in a large group of long/short equity hedge fund managers who are free to tilt their portfolio exposures to sectors, styles, market capitalizations, and geographic regions as they see opportunities.  While some may be right and some may be wrong, the net collective thinking should result in “dynamic beta” allocations over time.  Their collective moves in overall net exposure also helps dampen the volatility compared to a long only equity approach.  While not expected to catch all of the moves in an up market, the lower net exposure should result in smaller drawdowns and over time, investors may have the potential to earn equity like returns with less volatility than a long only approach.

    Traditional long only equity managers today are constrained by the benchmark with which they are compared.  For example, a large cap value manager may be compared to the Russell 1000 Value index.  In order for the manager to be deemed skilled, the manager must outperform that index.  In order to do so, the manager picks individual stocks they believe are good investments and end up with a portfolio that will have weightings that vary from the index.  If successful, the manager may attract more assets to manage and be called a hero.  If however, the manager is not successful and underperforms the index, they will lose assets and possibly go out of business.  Therefore, the manager will tend to not deviate too far from the weightings of the index so that in the case of underperformance, the differential will not be significant.  This is often referred to as closet indexing.  This phenomenon began in earnest in the mid 1980’s as a result of the influence of the growing institutional consulting industry.  Around the same time, and possibly as a direct result, hedge funds began to grow in number as managers who did not want to be constrained by a single style or index found the hedge fund structure to allow them to invest in the best ideas they could find and use hedging to lower their risk to the overall market.