Zurich Capital unveils fund indices



March saw the launch of Zurich Capital Markets' (ZCM) Global Hedge Fund Indices. They are designed to track the performance of five different hedge fund strategies: convertible arbitrage; merger arbitrage; distressed securities; event driven and hedged equity.


The indices are the result of the company's own research in association with Schneeweis Partners into over 2000 hedge fund managers. Zurich's main criteria for inclusion in the indices are strategy purity, a three year track record, sufficient assets under management to demonstrate organisational and managerial infrastructure as well as an ability to raise assets from sophisticated investors.


Approval of the addition and deletion of funds will be made through an Index Committee composed of two ZCM staff as well as leaders in academic and practitioner research, including chief investment officers of US pension funds. The Committee will make decisions on a quarterly basis. The indices are open to funds regardless of whether they are open or closed to new investment. About 20% of the funds in the indices are currently closed to new investment. ZCM believes that the establishment of the indices will help investors to establish a peer group and a benchmark for fund manager performance evaluation as well as to identify risk and return characteristics of different strategies. Garry Crowder, managing director of ZCM said: "We anticipate that the Zurich Hedge Fund Indices will become a market standard for the industry. As with traditional markets, investors require performance indices which accurately reflect the performance of individual strategies".


The indices are currently composed of 60 managers, with an average of about 10-15 firms per strategy.


ZCM have also launched the Institutional Benchmark Series, investable products designed to deliver the returns of the indices. The segregated managed accounts will be available in the five strategies that the indices include. ZCM will act as custodians of the accounts, controlling leverage and ensuring style consistency. Because of the structure of the accounts investors can invest new money monthly and can make investments and withdrawals with one week's notice at the most. There are currently 26 managers in the accounts and between $210-213m in these accounts, with another $65m expected by the end of March. The accounts carry a management fee of 150 basis points and a performance fee of 20% of aggregate profit.


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