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New Star re-opens access to hedge fund index

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New Star Asset Management is making a third offering of Hedge ETS, a London-listed daily tradable security.

New Star Asset Management is making a third offering of Hedge ETS, a London-listed daily tradable security. The Hedge ETS provides investors exposure to the RBC Hedge 250 Index, which has closely tracked returns on hedge funds and outperformed other recognised investable hedge fund indices.

Since its inception on 1 July 2005 to 30 March 2007, the Index achieved an annualised return of 11.3% outperforming other recognised investable hedge fund and fund of hedge fund indices on both an absolute and risk adjusted basis.
New Star stated: ‘Hedge ETS compliments other methods of obtaining exposure to hedge funds. Compared to most of fund of hedge funds the Index provides highly diversified exposure to hedge funds with minimal selection bias and consistency of returns. Compared to hedge fund replication strategies, which seek to mimic future hedge fund returns through the allocation to a limited number of factors based on historical data, the Index is more able to keep apace with rapidly changing opportunities in global markets through allocation to 250 actively managed hedge funds, with different strategies and styles’.
Ravi Anand, director at New Star Asset Management, said: ‘Hedge ETS offers unique access to the performance of the hedge fund universe through a well constructed representative index, with the added benefit of daily liquidity5.  Indices may seem an atheamea to hedge fund investing however, as interest in hedge funds grows there is increasing demand for diversified exposure to the asset class. 
He added: ‘This third offering is in response to strong demand from investors.  We expect interest from institutional investors and wealth managers seeking to benefit from the portfolio diversification benefits provided by hedge fund returns.’
New Star’s two previous offerings attracted investors from 20 different countries, in particular Spain, Switzerland, the UK and various offshore jurisdictions, raising in excess of USD 250m.
The Index is designed to be a representative, investable benchmark of the performance of the hedge fund asset class.  The Index has the following key features: 

  • Extensive diversification across over 250 hedge funds and nine distinct strategies;
  • Asset-weighted by strategy, approximately equally-weighted initially by hedge fund;
  • Rules-based construction methodology designed to emphasise inclusiveness and minimise selection bias;
  • Inclusive selection criteria which results in hedge funds which may have lock-ups, redemption gates, low liquidity and which are presently closed to investment;
  • Total assets under management of the hedge funds in the Index were USD 230 billion (30 April 2007, source: RBC Capital Markets).

Hedge ETS is the brand name for shares issued by the 1X and 3X cells of New Star RBC Hedge 250 Index Exchange Traded Securities PCC Limited, a Guernsey based Investment Company which enters into swaps with Royal Bank of Canada to provide exposure to the Index.

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