GLOBAL - Credit Suisse First Boston yesterday 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.
Roland Lorenzo, MD 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.
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 FTSE 100 Index grew by 8.69% and the MSCI World Index by 8.57%.
Over a corresponding period CSFB says the volatility of the fund was 9.31% compared to: MSCI 14%; S&P 500 15%; and Nasdaq 29.5%.
Lorenzo said that the fund represented an opportunity for pension funds to smooth over the volatile markets that have epitomised the last two years.
He added: 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. There will be no exit charges and no performance-based fees.
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