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Hedge Fund Indexes Launch in Germany

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MUNICH (–A German consulting firm, Talenthedge, this week launched its investable hedge fund index as part of an online offering that allows for the licensing of the index by institutional investors.

The Talenthedge International Hedge Fund Index will have its prices published online and will have an online shop for the purchase of index licenses. Founder Rene Friedrich is offering a one-month test period of the index for a flat rate fee, expecting institutional investors will be attracted to the index for the purposes of creating structured products for hedge index funds or index-tracking funds.

Mr. Friedrich is in talks with three institutions that are interested in establishing index-linked offerings in France, the United Kingdom and Germany. In each case, he said the initial product size is estimated to be about 10 million to 20 million euros (US$12 million to US$24 million). He hopes to finish two or more index licensing deals within the first three months of the launch.

Touted since August, the Talenthedge index has been delayed a number of times . According to a news release, the postponement was due to the stringent selection criteria used.

“The aim of the index is to be a performance benchmark for funds of hedge funds,” said Mr. Friedrich, in a statement. “So maximum diversification was not the aim here, rather minimum diversification and a high level of risk control.”

The index will include five to 20 underlying funds that are systematic, high-capacity hedge funds focused on liquid markets. And funds are able to apply for inclusion on the company’s web site. Part of the selection criteria is that the funds must have US$200 million in capacity. Overall index capacity is set at US$4 billion.

And due to the challenge of monitoring the funds, it’s required that the hedge fund’s offices be in one of 12 cities: New York; Chicago; Tokyo; Sydney, Australia; London; Dublin, Ireland; Paris; Munich, Germany; Geneva; Milan, Italy; Madrid, Spain; and Stockholm, Sweden.

The index is equally weighted, and pricing of the index will be done on a monthly basis net of fees.

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