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Ratings service Standard & Poor's announced plans Tuesday for an index that will track the hedge


Date: Wednesday, May 8, 2002

Ratings service Standard & Poor's announced plans Tuesday for an index that will track the hedge fund industry. Over the past few years, various financial intermediaries and consultants have attempted to develop indexes that are as valid a benchmark for the hedge-fund industry as those found in traditional stock and bond markets. S&P said the Hedge Fund Index will be broadly representative of the range of major strategies that hedge funds employ. It will contain 40 funds divided into three subindexes: arbitrage, event-driven and tactical. S&P, a division of McGraw-Hill Cos., expects to announce the components before the index is launched in the third quarter. It joins a growing list of index providers vying to become the ultimate arbiter of hedge-fund performance, including Credit Suisse First Boston Tremont Index LLC, a joint venture between Credit Suisse First Boston and Tremont Advisers; Zurich Capital Markets, a New York unit of Swiss giant Zurich Financial Services; Van Hedge Fund Advisers International of Nashville; the Hennessee Hedge Fund Advisory Group of New York. Morgan Stanley Capital International, a unit of Morgan Stanley Dean Witter & Co., is also planning a hedge-fund index. There's more at stake than just bragging rights: S&P and some other index providers are hoping to tap into growing interest on the part of institutional investors. Hedge funds have been attracting record amounts of new money since stocks entered a bear market, but some pension funds and endowments have been reluctant to invest because there's no widely accepted way to measure performance. S&P has granted PlusFunds, a service provider to the hedge-fund industry, an exclusive license to develop investment products based on its hedge-fund index. Zurich Capital Markets and Credit Suisse First Boston have also launched multi-manager vehicles that invest with the component funds of their respective indexes.