Harry Kat: Changing His Tune?

Earlier this month, John Cassidy profiled Harry Kat, hedge fund replictor. It certainly seemed that Kat's business was to replicate the returns that hedge funds generate, if not on a month-to-month basis then certainly over the medium term.

Rather than trying to emulate a hedge fund’s monthly return—a nearly impossible task—the researchers sought to match the fund’s results over a period of several years, as well as the other statistical properties of its performance that investors were likely to care about most: the volatility of the returns, their correlation with the stock market, the likelihood of suffering extreme losses.
In the spring of last year, Kat sent me an e-mail in which he expressed confidence that he and Palaro would succeed. “It is possible to design mechanical futures-trading strategies which generate returns with the same, and often better, risk-return properties as hedge funds,” he said. “This means investors can have hedge-fund returns but without the massive fees and all the other drawbacks that come with the real thing.”...
Each night, after the markets have closed, FundCreator downloads financial data from all over the world and determines what new trades each of its users needs. When a user logs on in the morning, a red light flashes to indicate that action is needed. “You just click on it every day, it tells you what you need to do, you do it, and you get Quantum,” Kat said proudly. “It’s simple.”
[Emphasis added.]

Now comes the WSJ's Eleanor Laise, with a much more skeptical take on hedge-fund replicators in general. Kat turns up at the end:

Mr. Kat markets a competing approach to cloning that doesn't aim to match returns but instead tries to mimic typical hedge-fund characteristics, such as low correlation to broader markets.

Doesn't aim to match returns? I'd say that's a pretty sharp change of tune from Mr Kat. What on earth does it mean to "get Quantum" if you don't get Quantum's returns?

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