Deutsche Bank launches new index to replicate hedge fund returns

Deutsche Bank has announced the introduction of a new proprietary index, the db Absolute Return Beta Index (dbARB), which seeks to replicate hedge fund beta through a rigorously-tested passive investment process born from quantitative research.

The dbARB index does not invest in any hedge funds or fund of funds, but replicates the performance of funds of hedge funds through a proprietary algorithm that calculates the appropriate asset weighting, long or short, across a number of liquid asset classes.

According to Deutsche, the dbARB index outperforms other beta replication indices and investible fund indices because it replicates the return of hedge funds before fees. Furthermore, by replicating fund of hedge fund rather than single manager indices, dbARB is more representative of the whole industry as many of the top-tier hedge funds are also captured in these indices.

Says Stéphane Farouze, managing director and global head of fund derivatives: 'It is a natural evolution of a maturing hedge fund industry that beta products will be introduced to compliment active alpha managers.

'I believe that the db Absolute Return Beta Index is superior to the other hedge fund replication products due to its unique construction methodology in adding back the hedge fund fee structure, and as a result its superior performance.'

The dbARB index can be accessed via a variety of products including Ucits III funds, certificates and notes, and is available in a number of different formats from principal protected to leveraged to suit investors' specific requirements.

The index is the latest in the line of Deutsche Bank's institutional research models which seek to extract investment returns across various asset classes.

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