Public document · April 2026

PivotalPath Index Methodology

Construction framework, eligibility, and index hierarchy. Effective April 2026. Prepared by PivotalPath Inc. Distribution: Public.

How the PivotalPath hedge fund indices are constructed: eligibility, point-in-time bias controls, the four-level hierarchy, and the estimators behind every published index return.

Contents

1. 1 Overview
   1. 1.1 Construction Principles
2. 2 Avoiding Index Construction Biases
   1. 2.1 Selection Bias
   2. 2.2 Survivorship Bias
   3. 2.3 Backfill Bias
3. 3 Index Construction Methodology
   1. 3.1 Returns and Currency
   2. 3.2 Eligibility Criteria
   3. 3.3 Rebalancing and Update Frequency
   4. 3.4 Treatment of Standard Errors
4. 4 Index Hierarchy and Framework
   1. 4.1 Asset-Weighted Composite (HFC)
   2. 4.2 Equal-Weighted Composite (HFCEW)
   3. 4.3 Complementary Indices (Level 2.1)
5. 5 Index Reference
6. 6 About PivotalPath
7. Important Disclosures

1 Overview

PivotalPath is a hedge fund data and analytics firm covering more than 1,300 institutional-quality hedge funds. The firm partners with allocators representing over $650 billion in combined hedge fund investments. PivotalPath leverages this breadth of fund-specific data to construct hedge fund indices that are representative of the institutional hedge fund universe and designed to avoid the construction biases that affect most industry standards.

The PivotalPath strategy indices capture the average performance of a given strategy class over time. All data is provided by hedge funds directly to the firm; managers recognize PivotalPath as a partner that protects underlying information by aggregating and anonymizing it into useful indices.

1.1 Construction Principles

The methodology rests on three principles.

Meaningful.

The methodology avoids the selection, survivorship, and backfill biases that affect self-reported indices.

Consistent.

Index construction is rule-based, with fully parameterized definitions applied uniformly across strategies and through time.

Robust.

Out-of-sample parameter stress tests confirm stability of construction choices across market regimes.

2 Avoiding Index Construction Biases

Three biases distort the performance figures reported by typical hedge fund indices. PivotalPath addresses each at the level of data sourcing and index construction, rather than through ex-post adjustment.

2.1 Selection Bias

Issue

Bias caused by non-random sampling. Most hedge fund indices rely on self-reporting, where many higher-quality funds simply choose not to report.

Solution

PivotalPath sources funds based on quality and relevance through institutional partnerships with allocator clients and prime broker relationships. The firm has a direct relationship with every fund on its platform and does not rely on self-reporting.

2.2 Survivorship Bias

Issue

Pooling only managers currently in existence overstates past performance, since underperforming and closed funds are removed from the historical record.

Solution

A point-in-time methodology reflects the performance of funds available as of each historical reference month, whether or not they are still operating today.

2.3 Backfill Bias

Issue

Including all currently available funds overstates performance because new funds are typically added after a strong track record.

Solution

The point-in-time methodology only includes funds that were known to PivotalPath prior to the reference month in the backtest. Every datapoint that enters the system is documented.

3 Index Construction Methodology

3.1 Returns and Currency

All fund performance captured in the indices is reported net of all fees and denominated in U.S. dollars. Funds may be open or closed to new investment and may represent on-shore or off-shore vehicles; all are structured as limited partnerships.

3.2 Eligibility Criteria

To be included in a given calendar year's index, a fund must satisfy the following two conditions as of January 1 of that year:

1. assets under management of at least $50 million; and
2. a track record of at least 18 months.

Funds that fall below either threshold during the year remain in the index for the duration of that calendar year and are evaluated again at the next annual constituent determination.

3.3 Rebalancing and Update Frequency

The time-series frequency of all PivotalPath Indices is monthly. Indices are rebalanced monthly and constituents are determined annually at the end of each calendar year, taking effect on January 1 of the following year. Indices are published on the 15th and at month-end (or the next business day) for the prior reference month, and are updated daily as new fund returns enter the system.

3.4 Treatment of Standard Errors

For each reference month, the return of a PivotalPath Index for a given strategy is estimated at a date following the last calendar day of that month. Ex-ante standard errors accompany each estimate; ex-post errors are observed once the final estimate is produced. The current and prior six months are estimates subject to revision; all performance prior to that window is locked.

4 Index Hierarchy and Framework

PivotalPath's index construction is organized around a three-level hierarchy for the asset-weighted composite, with a parallel construction for the equal-weighted composite and a small set of complementary indices that operate alongside the main framework.

The Level 4 sub-groups are specialized cuts within a Level 3 sub-index that distinguish funds by an investment characteristic finer than the L3 categorization. They are currently maintained within the Equity Diversified branch, where the distinction between fundamental, activist, and quantitative styles is most analytically meaningful and where fund coverage is sufficient to support stable estimators. Level 4 sub-groups do not enter the Level 1 composite directly; instead, they serve as inputs to the QNT complementary index (see Section 4.3) and as standalone reference points for clients tracking style-specific performance.

4.1 Asset-Weighted Composite (HFC)

At the base of the hierarchy are the Level 3 sub-indices, where constituent funds are always equal-weighted. These sub-indices roll into Level 2 super-strategies (such as Credit or Equity Diversified), which are weighted by sub-index AUM. The super-strategies in turn roll into the Level 1 asset-weighted composite, where each strategy is weighted by strategy AUM. This structure is designed so that asset size matters at the strategy level while preventing any single large fund from dominating index performance.

The Managed Futures index is an exception to this pattern: it is published as an equal-weighted mean of its constituent funds, but enters the HFC composite via an AUM-weighted variant computed across its Level 3 sub-indices. See the note to Section 5.

4.2 Equal-Weighted Composite (HFCEW)

The equal-weighted composite is constructed differently. Rather than following the three-level hierarchy, it moves directly from the manager level to the composite, with every manager receiving the same weight regardless of AUM. In effect, the equal-weighted version flattens the hierarchy for construction purposes, while the asset-weighted version preserves it.

4.3 Complementary Indices (Level 2.1)

PivotalPath maintains three complementary indices that sit alongside the core hierarchy but are not part of the main roll-up structure: Equity Market Neutral (EMN), Equity Quant (QNT), and Relative Value (RVI). These were developed to reflect client use cases that do not fit neatly into the standard taxonomy. Each draws from multiple categories or emphasizes a particular investment characteristic — quantitative style, market neutrality, or lower-beta and hedged exposures — rather than representing a single exclusive branch of the taxonomy.

Constituents of EMN and RVI are equal-weighted across all funds in the respective constituent set. QNT is constructed differently: it is the union of two Level 4 sub-groups, EQDULSQNT (Equity Diversified: Long/Short Quant) and EQDGLSQNT (Equity Diversified: Global Long/Short Quant), each of which is itself an equal-weighted index of its constituent funds. The two sub-groups are then combined on an asset-weighted basis to form QNT, mirroring the Level 3 to Level 2 roll-up convention used in the main hierarchy. The annual determination and intra-year application convention is the same as for the Level 2 super-strategies.

Because these indices borrow from the broader universe differently, they should be viewed as supplementary analytical lenses, not additional layers in the composite construction process. The main composite remains exclusive, with no double counting of managers, while the complementary indices provide alternative ways to segment and analyze the hedge fund universe. Funds appearing in EMN, QNT, or RVI may also appear in their primary Level 2 or Level 3 index.

5 Index Reference

Codes correspond to those used in the PivotalPath Index Dashboard.

Level 1 = composite. Level 2 = super-strategy (asset-weighted into Level 1 for HFC). Level 3 = sub-strategy. Level 4 = sub-group within a Level 3 sub-index. Level 2.1 = complementary index drawing from the broader universe outside the main roll-up.

† The published Managed Futures (MFT) index is computed as an equal-weighted mean of constituent funds. For purposes of the HFC composite roll-up, an AUM-weighted variant across the MFT Level 3 sub-indices is computed in parallel.

‡ The Equity Quant (QNT) complementary index is the union of two Level 4 sub-groups, EQDULSQNT and EQDGLSQNT, each equal-weighted within its constituent set. The two sub-groups are combined on an asset-weighted basis using the same annual determination and intra-year application convention used for the Level 2 super-strategies. PivotalPath maintains additional Level 4 sub-groups outside the QNT construction; these are produced selectively and are subject to restrained distribution.

6 About PivotalPath

PivotalPath is a hedge fund data and analytics firm. Through its app-based portal, PivotalPath supports a diverse set of institutional investors representing over $650 billion in combined hedge fund investments with the insights and tools needed for informed investment decisions.

Through its dedicated research team, the firm has built lasting partnerships with both allocators and hedge funds through transparency and by ensuring allocators evaluate each manager in the right context. PivotalPath protects confidential manager information and only shares insights with its institutional investor clients. The firm enables clients with the full cycle of investment due diligence: intelligence reports, analytics, and performance analysis tools.

Important Disclosures

This document is provided for informational purposes only and does not constitute investment advice. Past performance is not indicative of future results. Index returns are calculated net of fees. The indices are not investable and do not represent actual portfolios. PivotalPath makes no representation regarding the suitability of this information for any particular investor. Please consult with a qualified financial advisor before making investment decisions.

The PivotalPath Index/Indices referenced in this document are produced by PivotalPath Inc. The information is representative of the overall composition of the hedge fund universe as well as specific sub-strategies, including but not limited to the PivotalPath Hedge Fund Composite Index; the PivotalPath Credit Index (and associated sub-indices); the PivotalPath Equity Diversified Index (and associated sub-indices); the PivotalPath Equity Sector Index (and associated sub-indices); the PivotalPath Event Driven Index (and associated sub-indices); the PivotalPath Global Macro Index (and associated sub-indices); the PivotalPath Managed Futures Index (and associated sub-indices); the PivotalPath Multi-Strategy Index; the PivotalPath Volatility Trading Index; the PivotalPath Equity Market Neutral Index; the PivotalPath Equity Quant Index; and the PivotalPath Relative Value Index.

PivotalPath Indices are the proprietary product of PivotalPath Inc. They represent hedge fund indices based on data collected from individual hedge funds. While PivotalPath considers the sources of such information and data to be reliable, such information has been verified but has not been audited by PivotalPath. No representation is made as to, and no responsibility or liability is accepted for, the accuracy or completeness of such information and data. PivotalPath Index constituents may be removed at any time and any PivotalPath Index may be restated, adjusted, or corrected at any time without notice.

Contact

PivotalPath Inc., 444 Madison Avenue, 29th Floor, New York, NY 10022. Telephone 212.257.4860. Email inquiry@pivotalpath.com. pivotalpath.com index.pivotalpath.com

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