Credit Suisse and AlphaSimplex Group have launched the industry’s first family of benchmarks developed specifically for 130/30 managers and designed to help the investment community more p
Credit Suisse and AlphaSimplex Group have launched the industry’s first family of benchmarks developed specifically for 130/30 managers and designed to help the investment community more precisely measure and manage the exposures and benchmark the performance of their invested assets.
Until now, 130/30 managers have benchmarked performance against traditional long-only indices, which are not designed to capture the long/short nature of 130/30-type strategies.
The Credit Suisse 130/30 Index family, developed by Credit Suisse in collaboration with AlphaSimplex Group’s risk analytics division, will feature both an investible index and a look-ahead index, and will cover a full range of investment styles, market capitalisations and regions.
The indices will be computed on a daily basis, and the calculation methodology will be transparent and replicable. Both Credit Suisse and AlphaSimplex will offer synthetic exposures and customised solutions related to the investible indices to their institutional and other clients.
The 130/30 index family will be managed by an index committee chaired by Dr. Andrew Lo, chairman and chief scientific officer of AlphaSimplex and a professor at the MIT Sloan School of Management. The vice-chairman will be Pankaj Patel, director of quantitative research at Credit Suisse. Leading industry experts will also be invited to join the committee.
‘Traditional benchmarks are almost always static groupings of securities, so what we’re doing – creating an index from a dynamic strategy that we place in the public domain – is a significant innovation,’ Lo says. ‘We hope that the increased transparency of these 130/30 indices will give investors and managers greater clarity about the risks and rewards of these hybrid products.’
Adds Patel: ‘We are giving 130/30 managers a benchmark against which to measure their portfolios, taking into account the actual constraints they face. While the investible index will represent a liquid tradable instrument, the look-ahead index will indicate the maximum potential alpha available to these types of strategies for a given set of constraints.’
Philip Vasan, head of prime services and capital services at Credit Suisse, says: ‘From the investor’s perspective, the Credit Suisse 130/30 Index family will define a more efficient frontier that reflects the emergence of these products, which, in turn, will allow investors to measure more precisely the alpha and the betas they are receiving.’
Founded by Lo in 1999, AlphaSimplex Group is an investment advisory firm based in Cambridge, Massachusetts, specialising in quantitative global macro and global tactical asset allocation strategies, beta-replication products and absolute-return risk analytics. Last month AlphaSimplex agreed to be acquired by Natixis Global Asset Management.
