This June saw Hedge Fund Research broaden its suite of indices with the introduction of the HFRL® family of indices, representing the performance of liquid areas of the hedge fund industry. This adds to the existing set of HFRI, HFRX and HFRU indices that are used by global investors and allocators to benchmark their hedge fund performance.
"We are very excited to offer the HFRL Indices," says Kenneth J Heinz (pictured), President of Hedge Fund Research. "The HFRL harnesses the universe of constituent funds from the HFRX to create an intraday performance benchmark, representative of the most liquid components of hedge fund industry exposure.
"The HFRI offers data on a monthly basis. For the HFRU and the HFRX we provide daily data on a T+1 basis. The HFRL now provides an intraday performance reference. Investors can now observe the HFRL and understand how hedge fund performance compares to the market in real time. That is a quantum leap forward in terms of responding to what investors require as both useful and powerful."
The underlying constituents for the HFRX are separately managed accounts offering position-level transparency. HFRL Indices are constructed using robust filtering, monitoring and quantitative constituent selection process using the HFR® Database. Such has been the popularity of the HFRI index series over the years that it has become to the hedge fund industry, in many ways, what the S&P 500 Index is to the US equity market.
With the HFRL, any positions from the HFRX that cannot be traded intraday are screened out so that only the most liquid components of the HFRX are used.
`The HFRL is basically very appealing to more liquid alternative investors, who generally receive performance data on a T+1 basis, as the HFRL is able to add an even greater level of insight throughout the trading day," says Heinz, confirming that the number of HFRL indices will be broadened later this year.
Currently, the indices that are available include:
• HFRL Global Index (HFRLHHFR): Designed to be representative of the liquid areas of the hedge fund universe. It is comprised of all eligible hedge fund strategies falling within four principal strategies: Equity Hedge, Event Driven, Macro/CTA, and Relative Value Arbitrage.
• HFRL Equity Index (HFRLHEDG): Designed to be representative of the liquid areas of the Equity Hedge fund universe.
• HFRL Event Driven Index (HFRLDRVN): Designed to be representative of the liquid areas of the Event Driven fund universe.
Investor demand for hedge fund performance continues to grow, driven partly by the popularity of liquid alternatives in recent years. Heinz sees this growth as complementary to the private hedge fund space.
"They are not competing with offshore hedge funds precisely because a large proportion of offshore fund strategies, such as activist strategies and distressed debt strategies, cannot easily be offered as liquid alternatives. The liquid alternatives audience is growing globally and that's why we developed the HFRL index," says Heinz, who, on winning this year's award for the fourth year running, remarks:
"HFR thanks the loyal readers of Hedgeweek and all of the hedge fund managers, investors and institutions who rely on HFR for definitive and robust benchmarks of hedge fund performance every day, year in, year out, for over 20 years. HFR looks forward to serving the ever expanding audience for HFR indices and research as the industry expands in the coming years."