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Manager vows to beat hedge fund returns for less

Reuters – Jerome Abernathy has a proposition for the world’s biggest pension funds — better returns than hedge funds without the headaches or heavy costs.

This may sound too good to be true to institutional investors, who have poured billions of dollars into the loosely regulated $2 trillion hedge fund industry in the hope of earning better returns, even as they worry about poor performance and the possibility a fund will fail.

But Abernathy, a money manager armed with electrical engineering and computer science degrees, is quietly convincing skeptics with proof that his Alternative Beta Fund delivers exactly that by investing in indexes instead of managers.

Sometimes called a "synthetic" hedge fund product or a "hedge fund replicator" — a phrase Abernathy said he dislikes because it sounds pejorative — the $250 million fund ended its first 12 months of trading in April with a 3.18 percent return after fees. That trumps the average hedge fund’s 1.78 percent return during the same period, Hedge Fund Research data show.

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