FT Alphaville points us to a paper "How do hedge fund clones manage the real world?", comparing the performance of 21 commercially available hedge fund replication products ("clones") in the period between April 2008 to May 2009. While the observation period is inevitably short, it nevertheless contains turbulent markets. The paper's conclusion is thus all the more remarkable, namely that clones perform competitively at a fraction of the cost of the underlying, and without much of the liquidity constraints of hedge funds also.
Separately, EDHEC finds the performance of cloning methodologies to be systematically inferior to the real thing. However, this study performs a proprietary cloning methodology. The significance of its finding is thus limited to the quality of those strategies. While being performed over a longer time period, we think that the above mentioned assessment of commercially available products is more practically relevant to investors.