Credit Suisse First Boston announced the launch of its first Hedgefund Index Participations “HIP” fund, which has been designed for investment by pension funds and other institutions who wish to diversify their portfolios across alternative forms of investment vehicles.
Commenting on the launch of the fund, Roland Lorenzo, Managing Director of Credit Suisse First Boston, said:
“Pension funds and other institutions are beginning to consider the merits of alternative asset classes in the light of continuing volatility of equities and poor returns on cash”.
“There is still, however, a resistance to investing in hedge funds as they are believed to be too risky. But experience suggests that they are much less volatile than equities whilst still offering equity-like returns with lower risk than traditional passive benchmarks, as demonstrated by the CSFB/Tremont Hedge Fund Index.”
“This new fund offers an even greater diversification of risk than a traditional fund of hedge funds, whilst still offering the potential for excellent capital growth, and is the latest example of CSFB’s innovative approach to structuring investment vehicles for these markets.”
The investment objective of the CSFB HIP fund is to maintain a portfolio that seeks to replicate the performance of the CSFB/Tremont Hedge Fund Index without engaging in trading for the purposes of generating performance beyond the index return.
Shares in the HIP fund will be listed on the Dublin Stock Exchange. The HIP fund will invest in a significant proportion of the hedge funds, which make up the CSFB Tremont Hedge Funds Index with the aim of tracking the Index.
Key points
The first fund to aim to track the CSFB/Tremont Hedge Fund Index
Unlike most other fund of hedge fund products, the HIP fund will be highly diversified across:
-a wide spread of fund managers-a wide spread of hedge fund strategies
No exit charges and no performance based fees
The CSFB/Tremont Hedge Fund Index grew on average at a rate of 11.62% a year between launch in 1994 and 2001. As a comparison, over the same period the FT-SE 100 Index grew by 8.69% and the MSCI World Index by 8.57%. Source for figures: CSFB International
Even though the marketplace is highly illiquid, the Fund will provide for monthly entry and quarterly redemptions
To reduce the risk of tracking error, the Fund employs an analytical portfolio construction approach and maintains a continuous dialogue with the Index’s member firms
Why hedge funds?
Hedge funds generally provide equity-like returns with lower volatility compared with traditional asset classes
Hedge funds provide additional diversification across asset classes
Greater degree of Stability of returns even during volatile market conditions