Credit Suisse, Dow Jones Indexes Launch Liquid Hedge-Fund Index

Date: Thursday, April 7, 2011
Author: Dow Jones Newswires

Credit Suisse Group (CS, CSGN.VX) and Dow Jones Indexes said Wednesday they are launching an "investable" index that allows investors to track the daily performance and weekly liquidity of liquid hedge funds.

Several data collectors provide monthly reviews of hedge-fund performance and quarterly fund flow data; the reviews are based on money managers' voluntary reporting, which can sometimes be erratic.

The new index, the Dow Jones Credit Suisse Core Hedge Fund Index, aims to help gauge the immediate impact of market events, such as last month's earthquake in Japan or the political tensions in the Middle East and North Africa.

A person familiar with the situation said the index during its testing phase dropped more than 1% in the middle of March, but has since narrowed losses, finishing the first three months of the year with a 1.17% increase.

The index tracks 40 managed account funds across seven style-based sectors: event driven, long/short equity, global macro, emerging markets, managed futures, fixed-income arbitrage and convertible arbitrage.

Managed accounts, which are owned by individual investors and monitored by professional money managers, can be redeemed by investors without the monthly or quarterly constraints imposed by managers in pooled investments accounts.

The person familiar with the situation said the funds tracked include some of the best-known ones offered by established managers, including Paulson & Co.'s Paulson Advantage Funds, Bridgewater Associates' global macro Bridgewater Pure Alpha fund and Man Group PLC's (MNGPY, EMG.LN) AHL Trend Fund, which invests in managed futures.

There was a resurgence in demand for liquid fund structures in the aftermath of the financial crisis, since many funds restricted investor withdrawals. Investors became more aware of the importance of liquidity and transparency in their investments.

"The Dow Jones Credit Suisse Core Hedge Fund Index clearly fills a void for investors seeking a reliable and trustworthy performance gauge of liquid, investable hedge funds," said Michael Petronella, president of Dow Jones Indexes.

Dow Jones Indexes is 90% owned by CME Group Inc. (CME) and 10% by News Corp. ( NWSA, NWS) subsidiary Dow Jones & Co., publisher of Dow Jones Newswires.

The index is the latest addition to the Dow Jones Credit Suisse Hedge Fund Indexes platform, which includes several geographical and strategy-specific hedge-fund indexes constructed from a proprietary database of more than 8,000 hedge funds.

Investments in hedge funds, which declined during the financial crisis, have risen as investors have pursued returns uncorrelated with the broad equities and fixed-income markets.

Hedge-fund administrator GlobeOp on Tuesday said it launched the GlobeOp Capital Movement Index tracking flows in and out of hedge funds, based on the roughly 8% to 10% of global hedge-fund industry assets administrated by the company. It will also release monthly information on forward redemptions at the funds it administrates, giving a picture on money coming out of the industry.

-By Amy Or, Dow Jones Newswires, 212 416 3142, amy.or@dowjones.com