Hedge fund indexes can be incredibly valuable — if you know what’s in them

When evaluating hedge fund performance, a quality index can serve as a meaningful benchmark. The index you choose may help determine your overall asset allocation or be the difference between investing in or redeeming from a manager. But quality indexes have historically been few and far between, leaving allocators with a very limited and often misleading visibility into the returns different managers are able to generate.

So, how can an investor determine whether an index is high quality and serves as a meaningful benchmark? Based on our experience, it comes down to four questions:

  1. What are the data that go into it?

  2. What is the methodology used to construct it?

  3. How is the information presented?

  4. Is there more to the index than just the average?

To read the full article click the button below or view all 4 parts in our “What’s in Your Index” Series on our home page at PivotalPath.com



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