Goldman Sachs and Merrill Lynch are leading an expected boomlet in so-called synthetic hedge funds. The idea is basically a passive investing approach to hedge funds--a way to replicate returns using various indexes. Both firms have recently developed products that have been designed to rely on historical monthly hedge fund returns and the use of market indexes to replicate them. For example, Goldman Sachs' Absolute Return Tracker depends on more than 15 indexes that track equities, commodities, fixed income and volatility. Merrill Lynch's product, which relies on fewer indexes, has apparently achieved a 90 percent correlation with hedge fund returns on a back-tested basis. The big draw for these products are the much lower fees that customers will pay. Most are betting that they find a big market.

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- here's an article from II.com