S&P launches next hedge index
Standard & Poor’s has launched the second of its single strategy hedge fund indices – the S&P Equity Long/Short Index (SPELSI).
SPELSI follows the S & P Managed Futures Index (S&P MFI), which was launched at the beginning of last year.
The roll-out of single strategy indices is part of S & P’s plan to expand selected strategies of its broad-based composite S & P Hedge Fund Index (S&P HFI) which it set up in 2002.
SPELSI is designed to represent hedge funds that rely primarily on fundamentally driven, bottom up research for long and short stock picking, and that try to create a separate alpha for both long and short positions, a technique known as ‘double alpha.’
The new index includes the five equity long/short funds represented in the S&P HFI, as well as 19 new funds that have been added to create a more representative single strategy index. It includes two regional sub-indices – one with a US focus and the other with a global ex-US focus – each made up of 12 funds.
SPELSI has been designed, like the S&P HFI, to be standardised, representative and investable, with independent verification of its constituents portfolio holdings. The index values are published daily, based on verified information from managed accounts run by the constituent hedge fund managers.
Standard & Poor’s constructed SPELSI from a universe of some 1,400 equity long/short funds drawn from commercial and other data sources. This was whittled down to 30, from which the SPELSI Committee selected the 24 constituents of the index.
All candidates for SPELSI will be subject to a due diligence process. S&P’s is using Albourne Partners, an alternative investment consultancy, to interview managers about their fund strategy purity, trading approaches and practices and operations.