MPI launches target volatility indices for hedge fund trackers

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Rohtas Handa, MPI

March this year saw Markov Processes International (MPI) launch hedge fund indices with data from BarclayHedge. The MPI Hedge Fund Indices were designed to deliver performance benchmarks by pairing monthly hedge fund indices with daily tracker indices comprised of liquid securities that enable daily monitoring of hedge fund performance and risk.

This month, Rohtas Handa, (pictured), EVP and Head of Institutional Solutions at MPI, explains that they have added to their hedge fund indices with the addition of target volatility indices for each tracker, enabling benchmarks to be tailored to a specific investor, allocation or product's desired risk level.

The MPI Eurekahedge 50 Tracker Index, which is a daily tracker for the Eurekahedge 50 Index, is now available in 6 per cent and 8 per cent target volatility versions. 

The MPI BEST 20 Tracker Index, which is a daily tracker for the MPI Barclay Elite Systematic Traders Index, is now available in 8 per cent and 10 per cent target volatility versions.

Handa says: “I think it’s an extension of what we have done before. We launched our hedge fund benchmarks with daily tracker indices to provide a better measure of hedge fund performance while also providing insight on what the drivers of returns are.

“While traditional hedge fund indices give a measure of overall performance, there isn’t a focus on what is driving constituent returns. So, we are excited to deliver these new insights.”

Handa believes that the combinations of these hedge fund indices allow investors to gain insights equivalent to those in traditional markets such as equities.

The addition of target volatility indices enables an investor to analyse hedge fund managers with similar risk profiles.

“We are giving investors more and more tools,” Handa says. “These are multi-asset class beta indices, which can now be used as a benchmark for assessing liquid alternatives as well.

“There are more and more hedge fund participants in liquid alternatives products, so it’s very important to have an appropriate benchmark for them.”

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