Quantpedia Answers



Don’t know exactly how to use our tools? Read our Quantpedia Answers series, which will give you a manual and responses to the most frequently asked questions through brief and clear instructions.

How to replicate a strategy with ETFs?

Can you replicate a fund’s performance with widely available ETF’s? Is a trading strategy actually producing alpha or only mixing different betas? Is a portfolio/fund/trading strategy driven only by particular ETFs? All of these questions can be answered in a matter of seconds thanks to Quantpedia Pro‘s ETF Replication tool.

1. Choose a Fund, Portfolio or a Trading Strategy you want to replicate with ETFs in a Portfolio Manager. In our example, we chose to replicate PSP US – Listed Private Equity:

etf replication portfolio2


2. Select an ETF Replication Tool:

etf replication tool2

3. Analyze the results. 
In our example, we analyzed how to replicate the performance of Listed Private equity ETF with different, more widely used “standard” ETFs. We can observe that Private Equity can be quite well replicated by mixing International Equities, Small Caps, High Yield and Emerging Market Debt.

replicate fund by etfs

Last but not least, no replication is perfect. There’s always some unexplained residual left after replication. We call it the Alpha. You can easily analyze this Alpha as a part of Quantpedia’s ETF Replication Report.

ETF portfolio contribution

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