We argue that only hedge funds whose returns are driven by beta management of exposures to latent risk factors could be successfully replicated. We develop a methodology for creating a portfolio of ETFs that replicates risk factor exposures taken by successful beta active cloneable hedge funds....

We reconsider the question of whether beta-centric hedge fund activity is predictive of superior performance. We construct a measure of overall beta activity of fund managers, Beta Activity, and find evidence that top beta active managers deliver superior long term out-of-sample performance...