Chicago-based Hedge Fund Research, Inc. has launched HFRX, a family of investable hedge fund indices. HFRX will be offered to institutional and retail investors through a number of leading investment banks from 31 March 2003.
Joseph Nicholas, HFR Group Founder and CEO, said: "HFR brings the benefit of indexation to the hedge fund space. In the region of one third of all institutionally managed hedge fund assets are indexed, so it stands to reason that the advantages of indexation should extend into the hedge fund arena. With a 10-year track record of hedge fund indexation based on proven and precise methodology, HFR is uniquely qualified to provide institutional investors with this new asset allocation tool."
The banks that will be offering HFRX include Dresdner Kleinwort Wasserstein (DrKW), Bear Stearns, Lehman Brothers, and Barclays Capital.
Mehraj Mattoo, Head of the Alternative Investments Group at DrKW, said: "We believe this will be an attractive first step tool for new investors to the hedge fund asset class as well as an opportunity for exisiting allocators that want to increase their exposure to hedge funds."
Marc Besson, Managing Director iof Derivatives Marketing at Bear Stearns, and Jean-Marc Spitalier, Head of Funds Structured Products at Lehman Brothers, confirmed that both institutions would be launching structured product ranges linked to HFRX.
Paul Coleman, Director of Solution Sales at Barclays Capital, said: "We expect to see strong and growing demand for structured investment products linked to the indices and providing an element of principal protection, We have recently added open-ended products to our funds-linked product range, and we are happy to be doing this with HFR."
HFRX consists of eight primary hedge fund strategy indices and an asset-weighted Global Index each providing a statistically pure proxy to the universe of hedge funds. The individual strategy indices, and the overall composite Global Index, have been designed to offer full transparency, daily re-pricing, consistent fund selection - asset-weighted and rebalanced on a quarterly basis - stringent risk management, and strict reporting standards.
The eight single strategies that comprise the HFRX Global Index are reflective of the strategies that dominate the asset class: convertible arbitrage, distressed securities, event-driven, equity hedge, equity market neutral, macro, relative value, and merger arbitrage.
HFR stated: "The investment and performance characteristics of each fund used in the index must be consistent and representative of its respective strategy, in addition to being open for new capital. Daily risk management, based on closed-system transparency and independent daily repricing, is then applied to HFRX to ensure certainty of underlying exposures and to capture strategy pure returns."
It added: "Investors who have been reticent to invest in hedge funds, due to factors such as the high costs of manager selection, due diligence and avoiding 'blow-ups', can use the HFRX range to meet specific portfolio capital requirements without such concerns."
Background Note: The Chicago-based HFR Group LLC, founded in 1993, is a global leader in hedge fund research, indexation, and asset management, The HFR Group companies include Hedge Fund Research, Inc. and HFR Asset Management LLC.
Hedge Fund Research produces The HFR Database of hedge fund performance and information, and distributes the HFR Indices and HFRX.
HFR Asset Management offers a range of hedge fund investment products: funds of funds, single manager funds and customised multi-manager funds, in addition to the licensing rights for the investable indices. The HFR Group also has offices in London and Milan.