Everybody’s Getting Into the Indexes Act — Even Hedge Funds

April 01, 1999

Credit Suisse First Boston Inc. is teaming up with Tremont Advisers Inc. to publish a set of hedge-fund indexes expected to be launched in early October. The joint venture will also create a line of investable index products tied to the new indexes.

"The premise of the master index is to measure the investors' experience in hedge funds," said Hunt Taylor, senior vice president of Tremont Advisers. Overall performance of hedge funds in general can be hard to determine.

"Beyond that, we will be launching specific series of indexes that track the various investment categories that comprise the world of hedge funds." The indexes, to be followed next year by a number of investable hedge fund index products aimed at institutional investors, will include a capital-weighted master index for global hedge funds and a series of about 10 sub-indexes based on different investment strategies and styles, both companies said in a press release.

The series of indexes will be developed by Credit Suisse First Boston Tremont Index LLC, a joint-venture company created by CSFB subsidiary Credit Suisse First Boston Index Co. and Tremont. The indexes will be created using the TASS+ database of more than 2,600 hedge funds.

There are other hedge fund indexes available, but Taylor believes this is one of the first, if not the first, to use capitalization weighting as opposed to equal weighting. "Almost any (hedge fund index) that I'm aware of is equal-weighted," he said. "When you create an index with George Soros and a manager handling $25 million getting equal representation, you're going to get a skewed view of the world."

The capital-weighting is largely possible because of the TASS+ database which tracks the component hedge funds' assets under management from inception; such data can often be difficult to get. "TASS+ has always made it a practice to get a fund's assets under management since inception. Basically, TASS+ will not even list you if it doesn't have that information," Taylor said.

Taylor is confident in the unique qualities and convinced of the usefulness of the new hedge fund indexes. "There's never really been anything that's been accepted as a general indicator" for hedge funds, he said.

 

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