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Eurekahedge Hedge Fund Indices Methodology
Eurekahedge February 2005

 

The rationale for launching the Asian hedge fund indices

Due to the relatively small size and opacity of the Asian hedge fund industry, we felt there was a need to increase the exposure of Asian-based managers and to offer an indication of their performance. The Eurekahedge indices allow us to do this by highlighting the returns of the industry as a whole. The indices also serve to highlight to investors the kind of impressive returns possible from the Asian hedge fund sector. There are three indices in our family, namely the Eurekahedge Index, the Eurekahedge Japan Index and the Eurekahedge Asia ex-Japan Index.

The rationale for launching further indices

After much positive feedback from both single managers and funds of funds using our Asian indices in their presentations and monthly performance reports for investors, the demand was there to launch more indices based on the data in our other regional hedge fund databases. To that end we have recently launched a whole suite of indices based on data from the following databases:

  • The Eurekahedge Asian Hedge Fund Directory Database
  • The Eurekahedge European Hedge Fund Directory Database
  • The Eurekahedge North American Hedge Fund Directory Database
  • The Eurekahedge Latin American Hedge Fund Directory Database
  • The Eurekahedge Global Fund of Funds Directory Database
  • The Eurekahedge Long-Only Absolute Return Fund Directory Database

In addition, the total number of funds that we cover - now in excess of 5200 - has enabled us to produce a global index and a global emerging market index.

Construction

The Eurekahedge family of indices are equally-weighted and mean return-calculated. Re-balancing occurs periodically as new funds' historical performance returns are reported and constituent funds cease to operate. New constituents are priced in at the prevailing index level in order to maintain performance consistency. Departing constituents are dropped, and the remaining funds' subsequent performance is re-weighted using the existing number of constituents in the index.

For the small, mid and large cap indices asset levels are set at fixed values and the underlying constituents are reselected on a monthly basis. For example, the Eurekahedge Asian Small Cap Index only includes funds with less than US$50m. If a fund then raises assets above this level, it will leave this index and enter the mid cap index (fund size between US$50m and US$250m). Historical index returns, however, will remain unchanged.

Reasons for equal and not asset weighting

Firstly, the indices are designed to give an indication of the performance of the hedge fund industry but if asset-weighted, then monthly re-weightings would be driven as much by where new money was invested as by the actual trading record of the constituent funds - a situation which we believe would negate the reliability of the indices as a dependable benchmark of hedge fund performance. This also ensures that currently fashionable investment strategies do not skew the index in their favour.

Secondly, when we first launched the Asian index, two of the largest Asian hedge funds represented 25% of overall assets. This situation would have quite obviously distorted a weighted index.

Current Eurekahedge Indices

Asian Hedge Fund Indices

  • Eurekahedge Asian Hedge Fund Index
  • Eurekahedge Japan Hedge Fund Index
  • Eurekahedge Asia ex Japan Hedge Fund Index

  • Eurekahedge Asian Small Cap Hedge Fund Index
  • Eurekahedge Asian Mid Cap Hedge Fund Index
  • Eurekahedge Asian Large Cap Hedge Fund Index

Latin American Hedge Fund Indices

  • Eurekahedge Latin American Onshore Hedge Fund Index
  • Eurekahedge Latin American Offshore Hedge Fund Index

Fund of Funds Indices

  • Eurekahedge Global Fund of Funds Index

New Eurekahedge Indices in the Pipeline (to be launched in Q1 2005)

Asian Hedge Fund Indices

  • Eurekahedge Greater China Hedge Fund Index
  • Eurekahedge India Hedge Fund Index
  • Eurekahedge Korean Hedge Fund Index
  • Eurekahedge Australasia Hedge Fund Index

  • Eurekahedge Asian Convertible Arbitrage Hedge Fund Index
  • Eurekahedge Asian Distressed Debt Hedge Fund Index
  • Eurekahedge Asian Event Driven Hedge Fund Index
  • Eurekahedge Asian Fixed Income Hedge Fund Index
  • Eurekahedge Asian Long / Short Equities Hedge Fund Index
  • Eurekahedge Asian Multi-Strategy Hedge Fund Index
  • Eurekahedge Asian Relative Value Hedge Fund Index
European Hedge Fund Indices
  • Eurekahedge European Hedge Fund Index
  • Eurekahedge Eastern European and Russian Hedge Fund Index

  • Eurekahedge European Small Cap Hedge Fund Index
  • Eurekahedge European Mid Cap Hedge Fund Index
  • Eurekahedge European Large Cap Hedge Fund Index

  • Eurekahedge European Convertible Arbitrage Hedge Fund Index
  • Eurekahedge European Distressed Debt Hedge Fund Index
  • Eurekahedge European Event Driven Hedge Fund Index
  • Eurekahedge European Fixed Income Hedge Fund Index
  • Eurekahedge European Long / Short Equities Hedge Fund Index
  • Eurekahedge European Multi-Strategy Hedge Fund Index
  • Eurekahedge European Relative Value Hedge Fund Index

North American Hedge Fund Indices

  • Eurekahedge North American Hedge Fund Index

  • Eurekahedge North American Small Cap Hedge Fund Index
  • Eurekahedge North American Mid Cap Hedge Fund Index
  • Eurekahedge North American Large Cap Hedge Fund Index

  • Eurekahedge North American Convertible Arbitrage Hedge Fund Index
  • Eurekahedge North American Distressed Debt Hedge Fund Index
  • Eurekahedge North American Event Driven Hedge Fund Index
  • Eurekahedge North American Fixed Income Hedge Fund Index
  • Eurekahedge North American Long / Short Equities Hedge Fund Index
  • Eurekahedge North American Multi-Strategy Hedge Fund Index
  • Eurekahedge North American Relative Value Hedge Fund Index

Fund of Funds Indices

  • Eurekahedge Asia/Japan Fund of Funds Index
  • Eurekahedge North American Fund of Funds Index
  • Eurekahedge Europe Fund of Funds Index
  • Eurekahedge Emerging Market Fund of Funds Index

  • Eurekahedge Arbitrage Fund of Funds Index
  • Eurekahedge CTA Fund of Funds Index
  • Eurekahedge Distressed Debt Fund of Funds Index
  • Eurekahedge Long / Short Equities Fund of Funds Index
  • Eurekahedge Event Driven Fund of Funds Index
  • Eurekahedge Fixed Income Fund of Funds Index
  • Eurekahedge Macro Fund of Funds Index
  • Eurekahedge Multi-Strategy Fund of Funds Index
  • Eurekahedge Relative Value Fund of Funds Index

Global Hedge Fund Indices

  • Eurekahedge Hedge Fund Index
  • Eurekahedge Convertible Arbitrage Hedge Fund Index
  • Eurekahedge CTA Hedge Fund Index
  • Eurekahedge Distressed Debt Hedge Fund Index
  • Eurekahedge Long / Short Equities Hedge Fund Index
  • Eurekahedge Event Driven Hedge Fund Index
  • Eurekahedge Fixed Income Hedge Fund Index
  • Eurekahedge Global Macro Hedge Fund Index
  • Eurekahedge Multi-Strategy Hedge Fund Index
  • Eurekahedge Relative Value Hedge Fund Index


  • Eurekahedge Global Long-Only Absolute Return Fund Index
  • Eurekahedge Bottom-Up Long-Only Absolute Return Fund Index
  • Eurekahedge Diversified Debt Long-Only Absolute Return Fund Index
  • Eurekahedge Dual Approach Long-Only Absolute Return Fund Index
  • Eurekahedge Top-Down Long-Only Absolute Return Fund Index

  • Global Emerging Markets Hedge Fund Index
 
If you have any comments about or contributions to make to this newsletter, please email advisor@eurekahedge.com

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