True Beta has launched what it claims is the first independent, factor based hedge fund replication service.

The company said its replication strategy was available through license to all market participants, including asset managers and investors for separate account execution. Banks and other financial institutions will also be free to license and white label the strategy.

The strategy, according to True Beta, is different from others in the market because it is independently managed and specifically designed to serve as a benchmark for the hedge fund industry with a transparent methodology and execution.

Hedge fund replication strategies are based on the premise that most hedge fund returns come from beta exposure. They aim to provide investors with the baseline returns of hedge funds without the high fees and liquidity constraints of investing directly in hedge funds.

"Since the vast majority of hedge fund returns come from beta, there is no need to pay high fees for base-line performance," said Rabbe Ekholm, True Beta's founder. "We encourage investors to focus on the real alpha generators in their manager selection, and leave the beta to us."

True Beta's replication strategy had a 93% correlation with the HFRI index when tested against historic data over a five year period.

Ekholm founded True Beta in 2007 with a focus on developing and marketing quantitative financial strategies to institutional clients.

Until recently Ekholm was chief commercial officer and a member of the management board of Saxo Bank. Prior to joining Saxo Bank he was a managing director at MSCI Barra, heading its content solutions group. He joined MSCI in 1999 as global head of marketing and was appointed head of the MSCI Equity Index business in 2004.