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S&P Hedge Fund Index Assets Broach US$1 Billion, Leveraged Product Introduced

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NEW YORK (–The S&P Hedge Fund Index, launched in October 2002, now has approximately US$1 billion in assets.

This total investment comes from about two dozen index products, whether on the main index or strategy sub-indexes, offered by various firms. Some of these are for institutions and have been used, for example, by insurance companies. Others, in particular Rydex Capital Partners’ Sphinx, are for individual investors .

A new vehicle was added to this lineup by PlusFunds Group Inc., which announced a leveraged fund linked to the index. The product augments the investor’s initial equity with additional capital from either direct borrowing or the use of derivative transactions.

“The demand for a leveraged vehicle that tracks the S&P Hedge Fund Index stems from our investors’ increased comfort level with the low volatility profile of the index,” commented PlusFunds vice chairman Diego Winegardner, in a statement.

According to PlusFunds, there is a target degree of leverage that it will try to maintain through regular rebalancing, but liquidity and other constraints might interfere with this process.

Index investing in hedge funds appears to be catching on, with major indexes attracting large inflows. Products linked to the CSFB/Tremont* Investable Hedge Fund Index, including principal guaranteed notes, received more than US$500 million of capital in three months .

*Tremont Capital Management Inc., Rye, N.Y., is a strategic partner of and a minority investor in HedgeWorld.

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