Wed, 29/01/2003 - 07:00
Standard & Poor's is preparing to launch a Managed Futures Index aimed at providing a transparent benchmark of the managed futures hedge fund strategy.
The new S&P Managed Futures Index index is expected to be launched in February and will be reported on a daily basis. Standard & Poor's expects to announce the index composition and methodology in early February.
Standard & Poor's has already granted PlusFunds, licensee on the S&P Hedge Fund Index, an exclusive license to develop certain investment products based on the S&P Managed Futures Index.
The S&P Managed Futures Index will offer investors an investable benchmark that is representative of the managed futures segment of hedge fund investing, focusing on the systematic, trend-following trading methodologies that constitute the significant majority of managed futures investment strategies.
Managed futures strategies are typically employed by commodity trading advisors (CTAs) who use positions in commodity and financial futures to seek to profit from price changes. Typically, volatile or steadily trading markets, whether up or down, have proven to be profitable for managed futures funds.
Paul Aaronson, Executive Managing Director, Standard & Poor's, said: "Managed futures funds are a particularly interesting alternative investment of late because they have shown potential to offer consistent positive returns in down equity markets."
Mr Aaronson added: "We believe that the S&P Managed Funds Index will add value to investors looking for a transparent, daily priced representation of the managed futures space that carries with it the qualities that characterise a Standard & Poor's index. As the hedge fund market continues to develop and widen its reach, Standard & Poor's will consider building out other strategies represented in the broad S&P Hedge Fund Index to provide a diversified range of tools for alternatives investors."
The S&P Managed Futures Index is an expansion of the managed futures sub-set of the recently launched S&P Hedge Fund Index, a broad index of 40 funds covering nine major hedge fund investment strategies.
The S&P Managed Futures Index has 14 constituents, four of which are also constituents of the S&P Hedge Fund Index. The S&P Managed Futures Index will offer a wider range of funds with varying levels of volatility.
Like the criteria for inclusion in the S&P Hedge Fund Index, potential S&P Managed Futures Index constituents must pass a series of quantitative screening criteria to ensure that they conform to style of investing most indicative of the managed futures universe with respect to return and risk characteristics.
After this screening, eligible funds must agree to offer daily transparency so that their valuations can be verified by a third party, in this case Derivatives Portfolio Management (DPM), and so that the index may be computed on a daily basis.
Finally, the candidate funds must pass a rigorous due diligence process conducted by Albourne Partners Ltd., the hedge fund consultant to Standard & Poor's, that is designed to identify those funds that are managed in accordance with their stated strategy or style, and maintain prudent risk controls and operational infrastructure.
A current list of constituents and pro-forma index values are available on the www.standardandpoors.com website and daily values will be available upon launch.
The index will be maintained by a committee process similar to that of the S&P Hedge Fund Index. The committee will meet regularly to ensure that inclusion criteria are being met and to implement necessary rebalancing. A decision to include a hedge fund as a component of the S&P Managed Futures Index does not reflect an endorsement by Standard & Poor's or the Committee of the investment merits of the fund.
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