S&P to launch hedge fund index

Standard & Poor’s (S&P)is to create a hedge fund index through its Global Index Services business, with the aim of providing a transparent benchmark of the hedge fund asset class.

Called the S&P Hedge Fund Index, it will offer investors a benchmark that is representative of the range of major strategies hedge funds use. According to S&P, Australian hedge fund strategies are in line with global hedge fund strategies, making the S&P Hedge Fund Index relevant as a benchmark.

The S&P Hedge Fund Index will contain 40 funds divided into the three sub-indices of arbitrage, event driven and tactical, which in turn will incorporate nine specific strategies including macro, equity long/short and managed futures. All strategies will be equal weighted for well-rounded hedge fund representation.

The S&P Hedge Fund Index is due to be launched in the third quarter of the year, and will make up the latest in S&P’s portfolio of indices measuring global equity, credit and commodity markets.

“We believe that the S&P Hedge Fund Index will fill a void that exists in the hedge fund market,” S&P executive managing director Paul Aaronson says.

“The S&P Hedge Fund Index will reflect the same rigorous and objective standards that characterise all Standard & Poor’s indices, which we expect will help satisfy the concerns of many investors.”

Hedge fund consultant Albourne Partners will conduct due diligence on all prospective funds for S&P, while hedge fund investment products developer PlusFunds has been granted an exclusive licence by S&P to develop products based on the Index.