Insights A Dow Jones Indexes Newsletter

Document Sample
Insights A Dow Jones Indexes Newsletter Powered By Docstoc

    Insights: A Dow Jones Indexes Newsletter

  Dow Jones Credit Suisse Hedge Fund Indexes

                                                                  For a really in-depth look at the industry, you can read our
                                                                  2010 Hedge Fund Industry Review (
                                                                  The Dow Jones Credit Suisse Hedge Fund IndexSM
                                                                  team prepared it. It examines the drivers of hedge fund
            Brian                                                 performance in 2010 and explores some of the more

         Peterson                                                 noteworthy trends that have characterized hedge funds.
                                                                  It also examines possible themes for this year.
  Director of Credit
   Suisse Index Co.,
                                                                  Insights: How have investor attitudes toward hedge
  LLC, and Head of
                                                                  funds and hedge fund indexes changed since before the
   the Hedge Fund
                                                                  recent financial crisis?
Index Group within
 Credit Suisse Asset                                              Peterson: Hedge funds experienced a 19% loss in 2008.
      Management                                                  This was the first year in a decade that they didn’t deliver
                                                                  positive performance as an asset class.

                                                                  Then in 2009 and 2010, hedge funds rebounded. They
  Insights sat down with Brian Peterson of Credit                 actually offered better risk-adjusted returns than traditional
  Suisse Asset Management to discuss the state                    asset classes. The fact is that they emerged from one of
  of the hedge fund industry and an exciting new                  the most significant market dislocations to date, producing
  offering within the Dow Jones Credit Suisse                     their highest return in 10 years. That really helped to bolster
  Hedge Fund Index family.                                        investor confidence and interest.

                                                                  As a result, the industry saw an estimated $22.6 billion in
                                                                  inflows in 2010. This represents the largest annual inflows into
  Insights: What kind of interest are you seeing in the
                                                                  the space since 2007, and it shows the promise to continue.
  Dow Jones Credit Suisse Hedge Fund IndexesSM this year?
                                                                  At the same time, we continue to see greater focus on
  Peterson: One of the big stories of 2010 was the ability
                                                                  transparency, liquidity, risk management and operational due
  of the overall hedge fund industry to surpass its previous
                                                                  diligence. These trends have also helped to increase interest
  high water marks. In the two years since global markets
                                                                  in hedge fund indexes.
  bottomed out, hedge funds have returned a cumulative
  31.55%—that’s a 5.67% gain over their pre-crisis highs          From an investor perspective, the diversified nature of the
  (as of December 31, 2010). In addition, according to our        Dow Jones Credit Suisse Hedge Fund IndexesSM helps
  research, more than 80% of hedge fund assets are now            anyone who wants to follow the broad market rather than
  above their previous high water marks.                          individual managers. It also communicates the aggregate
                                                                  performance of the hedge fund industry.
  So hedge funds’ ability to generate positive performance,
  despite increased volatility in overall markets, has prompted   Keep in mind that a hedge fund index isn’t meant to provide
  renewed interest in this space. As the industry’s premier       a subjective view on the direction of individual hedge funds
  asset-weighted hedge fund indexes, the Dow Jones Credit         and strategies. Instead, an index-based approach tries to
  Suisse Hedge Fund IndexesSM have received increasing            mirror the return of all sectors.
  investor and media attention, with extensive coverage in
  major publications, including The Wall Street Journal.
Insights: Credit Suisse only recently teamed up with Dow          This index is priced daily, and it’s set to become the new
Jones Indexes to publish its hedge fund indexes. What did         industry standard for tracking the performance of the liquid
Credit Suisse find appealing about working with them?             hedge fund universe. Its enhanced liquidity and transparency
                                                                  will also allow us to create unique new products.
Peterson: Dow Jones Indexes has a reputation for integrity
as an experienced calculation agent. As a global brand            We’re offering investors objective, transparent and cost-
name and an index leader, we believe that partnering with         efficient gauges of the hedge fund industry. Overall, we believe
them provides added credibility for these indexes.                that the Dow Jones Credit Suisse Core Hedge Fund IndexSM
                                                                  represents a significant innovation in hedge fund indexing.
For our part, Credit Suisse is a leader in the alternatives
space. We have more than $28.9 billion in hedge fund
assets under management. We’ve also been ranked one of            Insights: What’s the outlook for hedge fund indexing?
the top 15 largest fund-of-hedge-fund providers in recent
                                                                  Peterson: Hedge funds play an important role in the market,
surveys (by Institutional Investor).
                                                                  and we’re committed to measuring their performance. That
Our alliance marries the hedge fund expertise of Credit           way, we can provide the appropriate tools for market players,
Suisse with the indexing expertise of Dow Jones Indexes.          including investors, hedge fund and fund of hedge fund
Together, we have an industry-leading index family that           managers, academic researchers and anyone else interested
boasts one of the largest databases in the industry, with more    in the performance of the hedge fund space.
than 8,000 hedge funds representing $1.1 trillion in assets. In
                                                                  You have to remember what a significant part of the market
addition, by combining our two companies’ distribution and
                                                                  hedge funds represent. We currently estimate the market at
marketing capabilities, we’re looking to increase our market
                                                                  $1.7 trillion—and that number is growing. The Dow Jones
presence, brand recognition and index representation.
                                                                  Credit Suisse Hedge Fund IndexSM family provides a platform
                                                                  to track the industry and industry trends because it captures
Insights: Tell us about the newest index: the Dow Jones           the most important information.
Credit Suisse Core Hedge Fund IndexSM. Why was it created?        In addition, hedge fund indexes can serve as benchmarks
How is it different from the other indexes in the family?         for investors to measure their performance. This is also the
Peterson: The credit crisis of 2008 heightened hedge fund         case for funds within the industry that might want to gauge
investors’ awareness of their liquidity needs. As a result,       how they’re performing relative to their peers. These two
today they’re actively seeking objective, transparent insight     factors can’t be underestimated.
into the performance of the hedge fund industry.                  Now that the worst of the financial crisis seems to be behind
The new Dow Jones Credit Suisse Core Hedge Fund Index       SM    us, sentiment has shifted on hedge funds. Our research and
was launched in response to this demand. It fills a void for      experience suggest that today’s investors are focusing more
investors seeking a reliable and trustworthy performance          keenly on manager reputation and track records as well as
gauge of liquid, investable hedge funds.                          strong operational platform and oversight. We’re finding that
                                                                  they need our indexes more than ever before.
The index was designed to track the performance of this
market. It’s the first asset-weighted hedge fund index to
comprise managed accounts and other regulated fund
                                                                    For more information on the Dow Jones
structures sourced from across a range of platforms. This
                                                                    Credit Suisse Hedge Fund Indexes , visit:

represents an advantage over other investable indexes,
which are limited to the funds available on single managed-          >
account platforms. It also ensures that the index provides
the broadest representation of the liquid hedge fund
universe—without platform bias.