Morningstar – A new breed of clone funds seeks to capture "alternative beta." It wasn’t long ago that hedge funds were on the very cutting edge of finance. Their pitch was simple: they could deliver pure alpha , rather than the heavy doses of beta being dished up by long-only mutual funds. The rub was that you’d have to pay dearly for that elusive component, and to get it, managers would often have to operate in inefficient markets where liquidity and capacity were scarce. Now that some of the mystique has left the asset class, a new concept has made its way to the investing frontier: hedge fund replication.

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Tags: asset class, beta, cutting edge, finance, frontier, heavy doses, hedge fund, hedge funds, inefficient markets, liquidity, morningstar, mutual funds, mystique, new breed, pitch, replication

Reuters UK – Hedge funds are going to have to dance to their investors’ tune once more as lucrative profits fall and a new breed of clients begins flexing its muscles, demanding more results from managers.

Institutional clients, a growing part of the hedge fund investor base, are questioning high fee levels and say they want to see what managers are really doing with their money — an understandable worry since the Madoff fraud.

They also want to know how hedge funds manage risk in choppy markets after record performance losses last year, and are balking at funds that are restricting investors from accessing their money by using so-called gates.

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Tags: choppy-markets, fraud, fund-investor, gates, hedge fund, hedge funds, institutional-clients, investor base, investors, lucrative profits, money, muscles, new breed, performance losses, record performance, reuters, risk, worry