The FT today reported that JP Morgan is this week to join Merrill Lynch and Goldman Sachs as a provider of hedge fund replication strategies. JP Morgan’s Alternative Beta Index looks, on the face of it, similar to the Merrill Lynch Factor Index (MLFI). As we reported in January, it was Merrill and not (as was widely misreported) Goldman which was the first bank to market with a hedge fund replication strategy. To read the article click here.
Merrill has since further built out its replication offering with the launch of a further index, this time the Merrill Equity Volatility Arbitrage Index, and seems to have stolen an initial break on the competition in this emerging product line.
Barclays Capital has also begun testing on a hedge fund replication strategy, The FT reports. Given the recent buzz in financial markets about replication it’s hardly surprising that the UK bank may be looking to join its American rivals with a replication offering. It does mark, however, a slight change in line from what Barclays has previously told the press.
In the January article we reported comments from its head of Global Investor Solutions, Giles Rothwell, that it was not seeking a solution at the moment.
The only clue Barclays offered at the time was this: "Replication strategies are interesting as a concept and they are feasible because of the liquidity and cost saving they bring to the market," Rothwell said.
Maybe Barclays knew more about its hedge fund replication plans than they let on back in January? Will another bank look to replicate replication, and will the strategies find favour with high net worth investors like some wealth managers have predicted?
Daniel Sheehan, Staff Writer, Structured Products