If the trend is towards core-satellite hedge fund portfolios, what does that mean for resource budgeting? It is tempting to see this as a passive-active portfolio – why would an investor not wish to maximise her budget for the active part and minimise her budget for idiosyncratic risk, illiquidity risk and, of course, costs, in the passive part? This is the argument behind ‘hedge fund beta’ – investable indices, ETFs, super-diversified funds of funds and quantitative, hedge fund replicators.
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