Standard & Poor’s, which runs some of the world’s most widely followed equity indexes, hasn’t fared as well in its efforts to track the performance of hedge funds.
S&P said earlier this week that it will stop publishing its investable S&P Hedge Fund Index because a decline in the number of managers tracked by the benchmark no longer makes it representative of the broad range of strategies in the industry.
The firm, a division of The McGraw-Hill Cos. (MHP49.64, +0.98, +2.0% ) , said it’s considering publishing a different monthly index that tracks the same hedge funds but doesn’t allow investment in them. This would help clients that still use it as a benchmark to measure the performance of their other hedge fund holdings, S&P explained.
S&P unveiled its hedge fund index in 2002 as several of its rivals were also trying to capitalize on the increasing popularity of the private investment pools. Morgan Stanley Capital International, a division of Morgan Stanley (MS62.54, +2.40, +4.0% ) , introduced its own version the same year, joining more established hedge-fund-tracking firms including Credit Suisse (CSR55.09, +2.27, +4.3% ) , Tremont, Hennessee Group, Van Global and The Barclay Group.
Not being an expert in the industry, S&P got hedge fund consultant Albourne Partners Ltd. to help it pick 40 managers who used a variety of strategies including convertible arbitrage, distressed and special situations investing and managed futures.
Hoping its reputation in indexing would attract institutional investors such as pension funds, S&P gave PlusFunds Group Inc. a license to develop investment products based on the new index. PlusFunds made the S&P Hedge Fund Index investable through separately managed accounts with the underlying managers.
