Lehman Brothers is exploring the possibility of coming out with an index for hedge funds that would include fixed-income products, according to Steve Berkley, managing director and global head of fixed-income indices in New York. The firm is also considering adding bank loan, floating-rate asset-backed securities and commodities indices, as part of a broader effort to maintain what he said is the firm's dominant position in the market for fixed-income indices. The firm's Aggregate Bond Index is used by about 90% of core U.S. fixed-income investors, he said.
Indices for hedge fund and bank loan investors would pit Lehman directly against Credit Suisse First Boston, which already offers indices along these lines. Berkley said any new indices should be well received because investors have asked Lehman for them.
Berkley declined to specify what would comprise the hedge fund index or when it may come out because he said Lehman has not made a firm decision on whether to actually roll out such a product. He stressed a hedge fund index is one of many on the firm's radar screen. But one characteristic of securities in all of the firm's indices is investors must be able to hedge the constituents, he pointed out. Still, he noted the firm only recently began investigating and expects to further detail the make-up of any potential index in about a month. "We're not yet confident the indices will go out but they're on our radar screen," he added. It could not be determined why the firm is looking to develop such indices now.
Several factors are affecting the decision-making process. "It's a question of resources, clarity on what we'll build, collecting data, the environment and working with clients before we can be firm the index will go out," he said. Berkley noted while there are existing hedge fund indices, there is no clear-cut standard on composition rules.
