Shorting hedge fund indices will be popular this year, according to speakers at last week's Structured Products Association conference in New York. Fabrice Hugon, a v.p. in the structured products group at SG Americas Securities in New York, said investors can play the spread between funds of funds and indices by going long the fund and short the index. Samir Mathur, a managing director and head of global hybrids derivatives trading for Citigroup in New York, has seen interest in index shorting, especially among clients with large bespoke portfolios of hedge funds who want to offset the positions with an index play.
Makers of hedge fund indices are evolving their products in response to the growing interest. The HFRX Global Hedge Fund Index, developed by HFR Asset Management, will grow its platform to 100 funds from 78 within two months, said John Larkin, a managing director in institutional and third-party sales with HFR in New York. He said over 30% of traditional investments are now indexed, adding most hedge fund of funds fail to outperform the HFRX on a consistent basis
Morgan Stanley Capital International introduced Thursday the MSCI Hedge Invest Strategy Indices, eight investable indices, each focused on a specific hedge fund strategy. The indices are divisions of the composite MSCI Hedge Invest Index, based on 120 funds from the Lyxor Asset Management platform.
This year will see a move away from multi-strategy fund of funds to more specialized and strategy-focused products, said Jason Garmise, v.p. in the investment products group with Ivy Asset Management in Garden City, N.Y. "People are getting more comfortable with the asset class and the risks involved," he said.
