| Hedge fund indexes are a growing
phenomenon, though some have been around for
years. A number of financial firms have
recently created their own version, and all are
competing with each other based on
comprehensiveness, methodology and other
factors. Hedge fund managers hope that the
proliferation of these indices will make
institutional investors more comfortable with
hedge funds (since they can then have a
benchmark). Here is list of hedge fund
indices. Please email us if you think we
missed any.
Hedge fund indexes differ in how they select
the underlying funds, and in how they construct
the index. Most, but not all,
equally-weight the components. Because of
the different construction methods, hedge fund
indexes that claim to cover the same
"space" can have very different
results.
Investability: A Very Hot Issue
Some hedge fund indexes are "investable",
meaning that they are constructed in such a way
that investable products can be created based on
the index. CSFB/Tremont, Hedge Fund
Research, MSCI, Standard & Poor's and Van
Hedge Fund Advisors are some of the firms that
have created such an index. Institutions that are
comfortable with the idea of indexing
traditional investments are taking a look at
these emerging vehicles. Financial firms
that want to create a product based on an index
usually pay a license fee.
Investable hedge fund indexes are seen by
some as a passive way of getting exposure to a
new asset class, without having to do the due
diligence required when investing in single
strategy hedge funds. Since hedge
funds-of-funds also take on the due diligence
chore for the investor, a criticism of the hedge
fund index is that it is a veiled fund of funds
(with a lower fee, of course).
Articles: A Growing List
A number of articles have been written on
hedge fund indices. Here is a growing list
(please contact us if you would like us to add
an article):
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