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Investable Hedge Fund Indices: Investable Indices or Hedge Fund of Funds?

I took some notes on Sandra Manzke’s talk at this week’s World Hedge Funds Summit .

I have enclosed slides from her Toronto presentation and a Eurekahedge presentation.

 Biography of Sandra L. Manzke Sandra Manzke, Chairman and Chief Executive Officer, founded Maxam Capital Management LLC in April 2005.

Prior to that, Sandra was the founder and co-CEO of Tremont Capital Management.

She was responsible for the oversight of Tremont’s operations and the development of Tremont’s business plan.

 She was also a member of the Investment Advisory Board. Sandra oversaw the creation and sale of Tremont’s life insurance products, which were the first to use hedge fund investments.

 Prior to the formation of Tremont, Sandra was a principal at Rogers, Casey & Barksdale, Inc., a pension fund consulting firm, from 1976 to 1984.

 While there, she served as the senior consultant to a number of major corporate/ERISA clients. From 1974 to 1976, she worked as an independent consultant at Bernstein Macauley where she was responsible for reviewing the firm’s investment products.

 She was at Scudder Stevens & Clark from 1969 to 1974, where she established one of their internal measurement systems during her tenure as an Investment Manager.

Sandra holds a Bachelor of Fine Arts degree from Pratt.

NOTES

Managers close, but they never close permanently.

When they reopen, they reopen for existing investors.

 Such prominent managers as Marc Druckenmiller, Marc Kingdon, Marshall Wace are not in any index, so the indices are always partial. Managers are slow to report sometimes, particularly after a down month.

 When Cerberus closed to new investors, some indices took it out entirely.

 But then they reopened to new investors, and they weren’t let back in. Providers of Investable Hedge Fund Indices include: EurekaHedge & MAXAM HFR: index is index of all funds that have managed accounts with them.

 CSFB MSCI FTSE Dow Jones Greenwich Van Royal Bank of Scotland Deutsche Bank-retail focused S&P is no longer offering investable hedge fund index Today 300 hedge funds in Hong Kong, about 300 in Canada Now launching a LatAm product.

 They launched a JV : Eureka is a data company, MAXAM is asset management.

How index is constructed: – Assets over $50m – Allocate initially to 30 largest managers – Flexibility to match country allocation, market cap, and strategy comprised in index – Rebalance semi-annually – If a manager closes ,the fund stays in the index A lot of fund of funds do not outperform the index, so people will move to the index.

It’s much cheaper to move to the index. $250K minimum

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