CREATION AND MAINTENANCE OF A LIQUID ALTERNATIVE BETA INVESTMENT FUND

摘要

A method of creating and managing one or more investment funds that seek to match or exceed the investment performance of a distinct subset (the "alternative beta") of the return stream provided by the hedge fund industry by replicating it through a dynamically-managed portfolio of liquid financial instruments. The method includes (a) analyzing the return stream using a combination of linear and nonlinear mathematical models; (b) identifying the specific components of the returns that can be replicated with liquid instruments; (c) selecting the financial instruments that meet certain criteria for liquidity, transaction costs and tax efficiency; (d) forming one or more investment funds that offer investors the ability to participate in such returns with superior liquidity and transparency; (e) directing the fund(s) to acquire the financial instruments in such manner as determined by the model; (f) rebalancing the portfolio on a regular basis to account for shifts in the investment patterns of the return stream. Software to perform the method using factors to minimize error inherent in regression analysis.