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Andrew Beer, Dynamic Beta Investments - Can You Match Or Outperform Leading Hedge Funds, But With Low Fees… | #220

E220 • May 13, 2020 • 64 mins

In episode 220 we welcome our guest, Andrew Beer of Dynamic Beta Investments. In today’s episode, we’re talking hedge funds and replication. We kick things off with some background that includes Andrew’s start in the industry with Seth Klarman’s Baupost Group in 1994. We discuss replication strategies, what Dynamic Beta is doing to try to outperform hedge fund portfolios, and most importantly, how they are doing it. We talk about the firm’s equity long/short and managed futures strategies, understanding key hedge fund allocations, and what the funds look like right now. As the conversation winds, down we chat COVID and what the future might look like for liquid alts.

Key Points

Hedge fund replication strategies aim to match or outperform portfolios of leading hedge funds with lower fees, daily liquidity, and less downside risk.
Dynamic Beta Investments employs a method that focuses on replicating hedge funds' asset allocation rather than individual stock picks, which has historically resulted in capturing the majority of pre-fee returns and starting with a significant fee advantage.
The liquid alternatives industry faces challenges such as overpaying for talent, single manager risk, and a lack of persistence in returns, but there is a growing sophistication among allocators who are now more critically engaging with the idea of hedge fund replication.

Follow Andrew: Website; LinkedIn

Resources: Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor (Klarman) Being Right or Making Money (Davis) The Research Driven Investor: How to Use Information, Data and Analysis for Investment (Hayes) Where Are the Customers’ Yachts? or A Good Hard Look at Wall Street (Schwed)

Speakers

Andrew Beer

Guest • 75%

Meb Faber

Host • 24%

Chapters

0:00	Introduction with Andrew Beer and Discussion on Hedge Fund Replication
1:27	Sponsor: Y Charts
2:33	Andrew Beer's Career Path and Experience in the Hedge Fund Industry
10:30	Analysis of the Hedge Fund Industry: Overpayment for Talent and Pros/Cons of Copying Positions
27:25	Andrew Beer's ETF Strategy and the Role of Consultants in Fund Selection
35:00	Exploration of Dynamic Beta and Managed Futures in Replication Strategies
47:20	Psychology of Fund Selection and Persistence of Returns in Active Management
55:00	Institutional Investment Mandates and Landscape of Liquid Alternative Investments
1:03:00	Role of Consultants and Complexity in Asset Management
1:27:22	Diversification, Understanding Investment Fees and Non-economic Reasons for Investing
1:34:37	Introduction to Other Hedge Fund Replication Strategies and Changes in Hedge Fund Exposure
1:47:18	Long-term Impact of COVID-19 Pandemic on the Hedge Fund Industry
1:52:26	Predictions for the Future of Hedge Funds and Reality of Hedge Fund Fees
1:59:07	Personal Biases in Research and Investing, and Memorable Investments

Transcript

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