Skip to main content

Investment approach

This is a Marketing Communication. For Professional Investors only. Not suitable for Retail Clients. Please refer to the SGMF Fund Prospectus for this UCITS Fund and the KIID before making an investment decision. Currency fluctuations may cause returns to increase or decrease.

We believe that hedge fund replication has the potential to deliver value without high fees, single manager risk, or illiquidity.  

Why replicate hedge funds?

Replication can capture strategic and opportunistic factor shifts, which have been an important source of alpha generation.

Past performance does not predict future returns. Source: SEI. 

The replication of pre-fee hedge funds returns works by:

  • Determining how target hedge funds are generating pre-fee returns today across equity, rates, currency, and credit markets through sophisticated, multi-factor models.
  • Investing directly in such exposures (“betas”) through liquid futures and ETFs.
  • Dynamically rebalance weekly or monthly.

How the investment approach works

Replication can potentially deliver that value without high fees, single manager risk and illiquidity. The entire process seeks to mitigate three key investment risks: market structure (liquidity, trade crowding, counterparty), concentration (single fund, industry, geography), and human biases (selection bias, gambler’s fallacy, etc.)

Strategy design

DBi, a US-based boutique specialist in “hedge fund replication,” was selected in 2015 to manage the portfolioDBi strategies start with product design, which combines rigorous statistical analysis with deep industry knowledge and experience.

  1. Select target: intuitive logic, diversification, quality of data
  2. Determine replicability: model speed, factor selection, persistence
  3. Set strategy constraints: futures vs. ETFs, long/short vs. long only, leverage/stop-losses
  4. Set product constraints: leverage limits, concentration limits, excluded assets, other regulatory constraints

Source: DBi

Strategy implementation

Once a strategy is live, rebalancing is entirely systematic (no discretionary overlays) and occurs either weekly for Managed Futures or monthly for Multi-Strategy/Equity Hedge.

Update target returnsBuild new time seriesRebalance positions(weekly or monthly)Run DBI engine

Achieve diversification through representative managers

The target portfolio consists of many leading hedge funds across the four main hedge fund strategies (Managed Futures, Equity Hedge, Relative Value, and Event Driven). The representative managers shown are subject to change. Information correct as of 31 May 2023.

Managed FuturesMan GroupMillburnAQRSystematicaCFMRepresentative ManagersEquity HedgeRenaissanceLansdowneMarshall WaceValue PartnersOdeyRelative ValueMilleniumHBKGoldentreeCarlsonBayviewEvent DrivenKing StreetCanyonHG VoraTrianContrarian
For more information on the Fund, contact the team today.

This includes emails, white papers, newsletters, event invitations, and company information. We will only use your data to provide you with this information. You can opt out at any time using the unsubscribe link in any of our emails or by emailing See our Privacy Policy at for details on how we store and process your data.