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Portfolio > Asset Managers

CSFB/Tremont Introduces Investable Sector Indexes

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NEW YORK (–CSFB/Tremont* Index LLC launched 10 investable hedge fund indexes corresponding to the strategy components of the benchmark. An investable version of the overall index was started last year.

Managers have been added to each sector to expand and deepen its coverage. Due to that, “An investor can use one sector as a diversified portfolio,” said Oliver Schupp, president of CSFB Tremont Index LLC. The sector indexes together currently have 114 underlying funds, including the 60 funds that are in the general investable index.

Some clients prefer a different sector allocation than what is offered by the overall investable index, he said. Some want the index provider to pick an alternative basket of sectors or strategy weights. Others, institutional investors in particular, craft a certain allocation themselves.

High-net-worth investors might like to get advice. “We will be able to assist clients, with the knowledge and expertise we have, in constructing portfolios,” said Mr. Schupp. CSFB/Tremont also is considering products based on predefined baskets. Possibilities include a relative value portfolio or an aggressive portfolio targeting higher return and risk.

Tactical allocation can make a significant difference in performance, as returns to different hedge fund strategies typically differ by several hundred basis points. This August, for instance, the CSFB/Tremont equity market neutral index was up 2.13% and the emerging markets index gained 1.83%, while managed futures lost 1.53% and global macro was down 0.75%.

Investment in CSFB/Tremont sector indexes is expected to start in November, but substantial asset inflow is more likely to come next year. Sector funds can be used in structured products.

Although the concept of index investing traditionally has been controversial in the hedge fund industry, various index products have made headway in gaining assets in the past 12 to 18 months (see ).

New York-based Credit Suisse First Boston Tremont Index LLC is a joint venture of Credit Suisse First Boston Index Co. Inc. and CSFB Alternative Capital Inc., both affiliated with the investment bank, and Tremont Capital Management, Inc., adviser to US$11 billion in hedge fund assets.

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

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Contact Bob Keane with questions or comments at: [email protected].


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