Hedge fund returns - make them yourself

For those interested in academic papers....

We know that hedge fund returns usually are non-normally distributed and non-linearly related with market returns. These characteristics of hedge fund returns can affect traditional measures of performance, like the Sharpe Ratio.
One alternative approach would be to evaluate a Hedge Fund by the cost of a replicating procedure, which would produce the same distribution of returns in the long-run trading liquid future contracts.

There is a paper about this study in:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=800665

Possibly one of the worst academic papers I've ever had the misfortune to read. Drivel.

Suprised that such a poor quality paper has been allowed to see the light of day.

The technical stuff (Statistics, Probability and Financial Economics) is coming in another paper.

This is an example of this technology applied for a famous American Hedge Fund.

Trading future contracts of S&P500 and Libor, we replicate the hedge fund distribution and also its dependence with the market portolio returns.

Look at the out-of-sample results. The moments of the hedge fund returns and the replicated returns are pretty close, and also its dependence with the market (measured by the linear correlation coefficient or the Kendall's Tau).