Hedge Fund Research – Best Index Provider
Kenneth Heinz (pictured) is President of Chicago-based Hedge Fund Research. Since it was established in 1992, HFR has become the standard bearer for indexation and cutting edge analysis of hedge funds, from strategy performance through to capital inflows and broad market dynamics.
Its HFR Database provides fund-level detail on historical performance and has in addition developed a sophisticated fund classification system. This enables users to perform benchmarking and determine relative fund performance within specific sectors and strategies.
Currently, the firm produces over 100 indices. Its flagship HFRI Fund Weighted Composite Index is the most widely used hedge fund benchmark. In addition to the HFRI and HFRX indices, the firm unveiled this year a new suite of indices to track the performance of UCITS hedge funds.
The HFRU Indices cover four sub-strategies that track the daily performance of equity, event driven, macro and relative value arbitrage UCITS-compliant hedge funds.
“We’re really excited about it. Since it’s been live I don’t think there’s a major European asset manager that hasn’t been in touch with us about these indices. We think it will be a powerful and robust characterisation of the performance of UCITS-compliant hedge funds,” comments Heinz.
Additional sub-indices are due to launch later this year, but even at this early stage the HFRU index suite is already tracking in the region of 700 managers.
Heinz and his team have been working on the project for quite some time. “We first conceptualised HFRU about 18 months ago. It’s the culmination of a long, detailed research process.
“The reason why the HFRU Index is important to us is because it enables investors to draw relevant comparisons between the HFRI Index and the HFRU Index, based on a common language. There are important elements of risk that need to be taken into consideration when evaluating performance, and I think the indices that we now offer can empower investors to make those important characterisations.”
The fact that the HFRU Index needs to provide daily, as well as weekly and monthly performance figures was, says Heinz, both an operational challenge but also a strong benefit.
For 20-plus years, HFR has been conceptualising the important components of the hedge fund industry, which is evident in the success of its index construction and research. But what differentiates the firm is that it thinks about all constituent users, from asset allocators to service providers, family offices, consultants, fund of funds.
Explains Heinz: “All of those different constituents are using the HFR research and indices to create a common language that forms a backdrop for the environment they’re transacting in. Are capital flows increasing, decreasing, are certain sectors doing better than others? Why did this fund do better than the index, and not this fund? These are all relevant questions that form the backdrop of a conversation when talking about which fund to invest in (or not).
“HFR operates in many respects as the official score keeper for the hedge fund industry. We provide a common point of reference that everyone is using, and that’s what makes our family of indices and research so powerful.”
On winning the hedgeweek award, Heinz adds: “HFR is both appreciative to the readers of Hedgeweek and thankful to the writers and editors for the distinguished honor and recognition the Award conveys.”
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