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Credit Suisse Tremont Issues Report On Hedge Fund Indices

by Carla Johnson, Investors Offshore.com, London

24 October 2007


A Credit Suisse/Tremont Hedge Fund Index 'white paper' issued this week, 'Gaining Efficient Hedge Fund Exposure through Passive Investing' offers a new perspective on hedge fund investing, describing hedge fund indexation as a cost efficient, transparent and diverse solution to capture the broad market performance of hedge funds.

According to the paper, passive investment strategies have become well established in the traditional asset management arena, and believe the same will hold true in the hedge fund market. The report finds that in fact, the core benefits offered by indexing— ease of management, capturing broad market performance, diversification, transparency and cost efficiency — directly address many of the challenges facing hedge fund investors today.

Some of the findings in Gaining Efficient Hedge Fund Exposure through Passive Investing include the following:

  • Hedge fund indices offer a way of analyzing returns by measuring performance against a peer universe of other hedge funds, providing a useful starting point for tracking alpha and beta against the general hedge fund market.
  • Hedge fund indexing alleviates the challenges faced by a wide range of institutional investors, including small and mid-sized pensions, endowments and foundations, where identifying top managers requires a significant resource and time commitment, largely fueled by a lack of transparency in the industry.
  • by tracking an index’s returns, an index-based portfolio should not significantly underperform the broad market and indexing can help manage exposure risk by offering a high level of diversification.

The Credit Suisse/Tremont family of hedge fund indices includes three separate indices:

  1. The Hedge Fund Index (“Broad Index”), an asset-weighted benchmark that measures hedge fund performance;
  2. The Blue Chip Investable Index (“INVX”), an investable index comprised of 60 funds across the ten style-based sectors
    in the broad index that are open to investment; and
  3. The Sector Invest Indices (“SECT”), which provide investment access to any of the ten style-based sectors in the broad
    index on an individual basis.

The full paper is available in the News & Press/Research section of Credit Suisse Tremont's website at www.hedgeindex.com. Credit Suisse provides its clients with investment banking, private banking and asset management services worldwide. Credit Suisse offers advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as retail clients in Switzerland. Credit Suisse is active in over 50 countries and employs approximately 45,300 people. Credit Suisse's parent company, Credit Suisse Group, is a leading global financial services company headquartered in Zurich.


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