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Who Needs Real Hedge Fund Managers? The Clone Wars Are On!

“Your clones are very impressive. You must be very proud.”

Don’t take Obi-Wan’s pre-financial crisis word for it. The real Jedi business has the returns to prove it.

The hedge fund world may be led by fast-talking, high-flying, flashy, yet furtive, star managers, but quants, math wizards and other alpha-seeking geeks in the back office have long given the industry its creds. Now the clones are taking over.

Hedge fund replication ETFs are often mocked as gimmicky, but in a real world where fraud scandals and investor outflows plague the hedge fund industry and retail investors gain access to once uber-elite funds, shouldn’t we be focused more on performance than pedigree?

In 14 months of trading, the Global X Top Guru Holdings Index has surpassed the critical $100 million in assets under management mark, with control over some $114.8 million.

GURU, which charges 0.75 percent per year and invests in U.S. equities like GameStop, Pioneer Natural Resources and Lockheed Martin, rocketed some 23.1 percent this year.

"We've been extremely pleased that investors are responding so strongly to the fund and that we are able to deliver such strong returns,” Justin Young, Head of Capital Markets at Global X, told ETF Daily News.

Even some of the smallest ETFs are outperforming behemoths.

Tiny ETF FlexShares Quality Dividend Dynamic Fund has less than $6 million in AUM, but it outpaced the titan Schwab U.S. Equity Dividend ETF.  Managing just $62.8 million, PowerShares Dynamic Healthcare Sector Portfolio has trumped the he S&P 500 Health Care Index and the Dow Jones U.S. Health Care Index for three years.

Beware, Stamford, Greenwich and Wall Street, the beginning of a new threat of the alpha galaxy!

Trading Fraud Scandals Don’t Bust Bosses (eFinancialCareers)

When hedge funds implode and banks get busted, the boss who sought and promoted aggressive trading talent often walks away from allegations or charges of fraud, even when warning sirens were blaring or when they provided motivation for malfeasance. Billionaires protect themselves and big banks protect their top talent, leavings underlings to fight alone in court.

Blackstone Builds Another Billionaire (Bloomberg)

Jonathan Gray, the 43-year-old chief of Blackstone Group’s real estate business, is the fourth billionaire to be minted at the world’s largest manager of private equity and property. Gray, who joined Blackstone in 1992 after graduating from the University of Pennsylvania, owns a $913 million stake in the firm.

The Hidden Risks of Top Banker Pay Caps (eFinancialCareers)

Stringent regulations on executive pay, performance and risk taking turn a blind eye on lower level bankers and traders who repeatedly get away with fraud as they seek short-term gains. Cornell Law School Prof. Charles K. Whitehead calls for regulatory changes including prohibiting banks from compensating new hires for the portion a previous employer would have doled out for long-term performance.

Conifer Grows New York Operations (FinAlterantives)

San Francisco-based hedge fund administrator The Conifer Group is expanding its North American presence with key hires in New York. Four new appointments include Drew Burggraf, formerly of UBS and Morgan Stanley, as vice president and team leader for the New York prime brokerage team, and Jarod Riley from Brown Brothers Harriman as vice president.

Icahn Twitter Taunts Ackman, Again (CNBC)

Billionaire Carl Icahn isn’t busting out a dime to leverage economy of words against rival activist investor Bill Ackman. “NYT's thesis that Ackman's actions prove something is wrong with activism is specious. His actions prove only something is wrong with Ackman,” Icahn Tweeted.

Wall Street Access on Hiring Spree (Traders Magazine)

Wall Street Access is building its ranks, adding four traders and three technicians from Murphy & Durieu and Direct Access Partners. The mass hiring is the firm's second since last fall when it tapped a dozen market makers from Rodman & Renshaw.

Buzz Around the Office

Stay Classy, Fake Journalism! (USA Today)

Ron Burgundy is publishing a memoir, “LET ME OFF AT THE TOP!: My Classy Life and Other Musings,” which will include "never-before-told stories of his childhood" and what led him to become TV's "greatest living news anchor."

List of the Day: Classes You Didn’t Think Could Land You a Job

Focusing on your major isn’t enough. Employers want college graduates with broader skills. Here’s what to study.

  1. STEM (science, technology, engineering and mathematics) typically teach students to logically approach advanced problems. Think Big Data analytics.
  2. Theater arts can develop the public speaking skills and poise needed to excel in client meetings and represent the company well.
  3. Professional writing will help you clearly, concisely communicate to and for a business audience.

(Source: CNBC)

Follow the author on Twitter @natashagural

AUTHORNatasha Gural Insider Comment

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