HFR Asset Management and Dresdner Kleinwort Wasserstein (DrKW) have launched a “Himalaya” structure for hedge funds as an asset class in the form of a five year capital guaranteed product that is effectively a set of Euro Medium Term Notes.
The new investment vehicle – termed the “Himalaya” to reflect its chart -is a five year capital guaranteed product that aims to return the principal sum invested plus 95% or 150% of the average growth of 8 HFRX Strategy Indices, with the value of the best performing strategy index being “locked in” for each of five successive years. At the end of the first year, the value of the best performing strategy index will then be eliminated with the process repeated for each subsequent year over a period of the next three years. At maturity, the value of the four remaining strategies will be set.
“The HFRX Himalaya has been designed to enhance the leverage and performance of hedge fund index investing,” says John Godden, Managing Director of HFR Europe. “It allows investors to get the best out of the HFRX indices with complete protection for their initial capital outlay. This is another milestone in HFR’s effort to increase the accessibility of hedge fund returns to a wider investor community and a significant addition to the already broad range of products based on our successful HFRX family of indices.”
DrKW has structured the new Himalaya – effectively Euro Medium Term Notes with 100% capital protection at maturity linked to the HFRX family of indices – and is acting as issuer for the product. Marketing of the notes starts this month to investors across Europe. The notes are available in US Dollar and Euro denominations.
“This is a first for investors since it applies the popular Himalaya structure previously seen with Equity Indices to the hedge fund asset class,” says Gabriel Segredo, Director in the Alternative Investments Group at DrKW. “DrKW is pleased to have provided the structuring expertise to help bring this innovation to HFR and the area of investing in hedge funds.”
The introduction of the Himalaya follows the adoption of the HFRX Index and of products based on the HFRX Global index and eight underlying sub-strategy indices. Since its inception in April 2003, HFRX has become a widely used hedge fund index employing an asset weighted, rules-based process that aims to closely reflect the global hedge fund industry.