Dow Jones suspends hedge fund indices after managers are asked to deleverage

Date: Tuesday, November 4, 2008
Author: Dow Jones Indexes

Dow Jones Hedge Fund Indexes has announced the temporary suspension of publication of the Dow Jones Hedge Fund Equity Long/Short and Equity Market Neutral Strategy Benchmarks from November 3 until further notice, as well as of the Dow Jones Hedge Fund Balanced Portfolio Indexes.

Dow Jones says the decision to halt publication of the benchmarks is the result of measures taken by the investment manager of the managed account platform that supports the Dow Jones Hedge Fund Strategy Benchmarks and Balanced Portfolio Indexes temporarily to reduce the risk profiles of some of its underlying managers by asking them to reduce their borrowing levels.

New York-based Lyra Capital, part of Crédit Agricole Structured Asset Management since September 2006, manages the platform that provides the underlying return series for the Dow Jones Hedge Fund Strategy Benchmarks and the Dow Jones Hedge Fund Balanced Portfolio Indexes.

According to the firm, Dow Jones began to use Lyra's investment methodology and platform as the basis for its hedge fund indices under an agreement dating back to October 2003. Lyra conducts manager due diligence, negotiates transparency and other key terms with managers, monitors managers' adherence to a style-pure investment mandate and negotiates structured platforms on behalf of select clients.

According to Jeff Lopez, deputy chief executive of Crédit Agricole Structured Asset Management Americas, Lyra had asked certain hedge funds on its platform to deleverage, and as a result Dow Jones had ceased publication of the indices using those returns because they would no longer reflect the broad performance of these strategies.

Index values for the Equity Long/Short and Equity Market Neutral Strategy Benchmarks are available up to October 31. No changes have been made to the strategy benchmarks for convertible arbitrage, distressed securities, event driven and merger arbitrage, which will continue to be published on an end-of-day basis.

Launched in November 2003, the Dow Jones Hedge Fund Strategy Benchmarks measure six hedge fund strategies, equity market neutral, convertible arbitrage, distressed securities, merger arbitrage, event driven and equity long/short (the latter launched in October 2004).

The Balanced Portfolio Index reflects the performance of a portfolio that is allocated approximately equally among six strategies on an asset management platform that seeks to track the Hedge Fund Strategy Benchmarks.