Barclays has expanded its offering of Quantitative Investments Strategies with the launch of the Novus Barclays Public Ownership HF Conviction Index Family, designed in conjunction with Novus.
The new indices aim to provide an alternative to market capitalisation weighted indices with a distinctive way to identify the key investment ideas of hedge funds. The indices also leverage some of the academic work done in this area of investing coupled with insights generated during the research and development phase.
In addition to the long-only indices, there will be market-hedged index versions, which hold a long position in the Novus Barclays Public Ownership HF Conviction Index and a beta-adjusted short position in the relevant benchmark index, with the aim of providing a ‘market neutral’ investment. This responds to investor interest in accessing this type of investment strategy whilst having very limited beta to the equity market.
Two sets of indices have been launched: one focusing exclusively on US domiciled US listed companies, and the other which includes all stocks that are listed in the US including, for instance, non-US based companies with liquid American Depositary Receipts. The indices aim to invest in a portfolio of liquid stocks in which there are the most hedge funds holders with high conviction positions. The data used to calculate the stocks which are most commonly high conviction positions will be provided by Novus.
“Barclays is delighted to expand our range of indices and increase the breadth of strategies available to investors via the index format,” says Benedict Redmond, Director of EFS Solutions at Barclays. “We believe that these indices will be compelling for a wide range of investors seeking alternative sources of returns, and we are very pleased to be able to leverage Novus’ expertise in this space to launch these indices.”
“In a world where information spreads ever faster and is available to everyone, we now have the chance to track the wisdom of crowds by applying big data techniques and intelligent algorithms to large datasets,” says Andrea Gentilini (pictured), President of Novus. “As a large aggregator of hedge fund public data and with our expertise analysing equity long short managers, Novus is pleased to collaborate with Barclays on the development of these new and innovative indices.”
Novus and Barclays began their collaboration in 2015, and over the last eighteen months have investigated ways to use the publicly available hedge fund holdings data, also known as 13F filings, to produce enhanced risk-adjusted returns versus comparable benchmarks. There is a significant demand for Smart Beta indices and these new indices aim to deliver hedge fund beta packaged in a more transparent and systematic manner.
Novus has over a decade of advanced experience analysing publicly-available hedge fund filings, and Barclays partnered with Novus in order to tap into the company’s insight and expertise in this field. Novus’ sophisticated analytics and their extensive hedge fund categorisation database, with its granular ability to focus on particular investment styles of hedge funds, perform the difficult task of analysing 13F filings and drive the indices.