Hedge fund consultant PivotalPath has launched a Hedge Fund Index App, a new product designed to solve the issues that limit the usefulness of hedge fund indices.
Institutional investors rely upon these indices for meaningful asset allocation decisions and when evaluating individual funds. Yet the ones offered by leading providers contain widely known systemic issues, leaving investors with limited or even misleading visibility into manager performance. PivotalPath’s Hedge Fund Index App provides the relevant information, context and analytical tools needed to truly understand performance across different funds and strategies.
There are several issues that make the practical use of hedge fund indices less effective than they could be. One of the main deficiencies stems from the incomplete set of fund managers or data that comprise them, resulting in what is commonly known as a negative selection bias. In addition to this bias, there is often a lack of consistency. The industry is known to put speed of reporting over accuracy, which often requires updates and restatements. As a result, institutional investors have either reluctantly accepted these deficiencies given the lack of better choices, attempted the costly exercise of building them in-house, or worse, have ceased using them altogether.
“Our unique philosophy as a hedge fund consultant has always been based on a simple question; how can an allocator make a good hedge fund investment decision if they don’t know all of the relevant choices? This is why we build the most robust peer groups and indices, so our clients not only know their full set of options, but have the transparency and tools to accurately evaluate, benchmark and monitor their hedge funds in the right context,” notes Jon Caplis, founder and CEO of PivotalPath.
PivotalPath has worked with some of the most sophisticated institutional investors since its founding in 2013, providing a more representative set of funds and better methodology for allocators to adhere to. The latest Hedge Fund Index App takes these solutions a step further by providing unparalleled transparency while protecting individual fund information from those that are not institutional investors through aggregation and anonymisation.
“The Robin Hood Foundation relies on PivotalPath and their hedge fund indices to evaluate its portfolio and individual managers in the right context,” says Mike Jacobellis, member of the Robin Hood Foundation Investment Committee. “As a byproduct of their rigorous hedge fund research, PivotalPath’s indices are more comprehensive, accurate and transparent than existing index providers, leading to more informed decisions.”
