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Replicating Funds via S&P 500 & Smart Beta ETFs

Is the whole greater than the sum of the parts?

Nicolas Rabener
10 min read
4 Dec 2023

SUMMARY

  • Mutual funds and ETFs can be replicated via the S&P 500 and long-short factors
  • An even simpler replication with the S&P 500 and smart beta ETFs works equally well
  • However, this is less effective for long-short or unique strategies

INTRODUCTION

Almost all investment products are bets on economic growth. Neither stocks, bonds, commodities, nor private asset classes like venture capital or private equity will do well when the economy is heading into a recession. Given this, most investment products can be decomposed into equities plus something, where a surprising number of asset classes and strategies like CLOs or convertible bonds represent nothing more than combinations of the S&P 500 and cash (read

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