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Hedge funds eliminate beta using the hedge. Whether they should meet market returns is a conversation institutional asset managers would have with their client
by wtvanhest 15y ago
Hedge funds eliminate beta using the hedge. Whether they should meet market returns is a conversation institutional asset managers would have with their clients, but in practice, the aggregate of all of them should net to zero.
- JumpCrisscross 15y agoIn practice all of them should net to zero conditional upon them being perfectly beta hedged and having zero net alpha. This is very, very, very rarely the practical case. If you had moderated your comment with "in theory" instead of "in practice", then you would be more right (since they would then converge at the risk-free rate, not zero).