With the belief that the pursuit of alpha is a zero-sum game, more investors are looking to simply add "Hedge Fund Beta" to their portfolio.
These early investors have been rewarded as the replicators outperformed their direct investment cousins in 2008 due to their greater liquidity and lower use of leverage.
In an Opalesque.TV video, Jaeger contends that hedge funds take systematic risk exposures to capital markets which lead to their premium, which he calls Alternative Beta.
The most intuitive replication methodology essentially looks at each hedge fund strategy in isolation, and qualitatively asking the question: What is the manager trying to do to generate returns?
However, a diversified portfolio of trading strategy indices is viewed, and frequently marketed, as a liquid alternative to direct exposure to the hedge fund industry.