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June 13, 2003 at 08:00 PM
LONDON (HedgeWorld.com)–Professor Lionel Martellini last week at a conference in London presented his work on creating an alternative index made up of existing hedge fund indexes.
Mr. Martellini, a professor of finance at the University of Southern California, Los Angeles, and French business school EDHEC, has applied numerous mathematical formulas to the leading hedge fund indexes to come up with the best way of building a comprehensive index for the hedge fund industry.
In the research paper put out by the EDHEC Risk and Asset Management Research Center in France, the group proposes the concept that the index of indexes benchmark has a higher degree of representation and stability of hedge fund performance than the indexes already available on the market.
Professors Martellini and Noel Amenc first proposed the concept last year in a working paper titled, “The Brave New World of Hedge Funds,” Previous HedgeWorld Story. Alteram, French hedge fund management firm, became the first company to use the EDHEC indexes, according to officials.
The indexes are compiled using information from the HFR, CSFB/Tremont,* EACM, Zurich Capital, Altvest, Hennessee Group, Van Hedge, LJH Global Investments, Magnum Investments, MAR, HedgeFund.net, Standard & Poor’s, Morgan Stanley Capital International and Barclay indexes.
In developing the new indexes, the EDHEC officials eliminated the alternative investment strategies for which four competitors were available. The strategies with a narrow focus, such as sector-specific strategies, were dropped in order to concentrate on more popular strategies.
