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I had been preparing a little dissertation about the growing fascination with the idea that hedge fund returns can be inexpensively replicated through strategies that don’t involve the payment of extortionate fees to those dedicated to the enrichment of fine art auctioneers, yacht brokers, fractional aircraft ownership vendors, Greenwich real estate agents and other dubious life forms.

Speaking of which, The Financial Times reports in this morning:

Goldman Sachs has become the first bank to create a hedge fund replication tool in a move that could lead to a shake-up of the $1,300bn hedge fund industry...Goldman will charge a flat 1 per cent.

Goldman’s Absolute Return Tracker index (Art), is set to be among the first of a flood of hedge fund cloning products likely to be launched in a revolution being compared with the arrival of index trackers in the mutual fund world a generation ago. “There is a lot of dead wood in the industry – people who should not be running hedge funds,” said Harry Kat, professor of risk management at London’s Cass Business School, who has just launched his own hedge fund replication tool.

Noted with interest: UK-based HedgeFundIntelligence lists Goldman Sachs Asset Mgt as the world’s largest hedge fund manager, with $29.5 billion in its grasp at Jul. 1, 2006, up 34 percent since January. The line for fee rebates starts on the right.

Noted with interest II: Things that make you go hmmmmm.

Goldman sets up hedge fund clone [$$]
By Steve Johnson
The Financial Times Dec. 4 2006

Goldman launches hedge fund tool
Reuters Dec. 4 2006

Top US hedge fund assets near $1 trillion (.pdf)
Absolute Return press release, Sep. 5 2006

Source: Goldman's New 'Hedge Fund Clone': A Good Idea?