Chicago Board Options Exchange® (CBOE®) has announced it has launched four new benchmark indexes in collaboration with Eurekahedge, a Singapore-based hedge fund research and data collection company, that measure the performance of hedge funds that employ volatility-based investment strategies. Values for the new indexes will be available on CBOE’s and Eurekahedge’s websites beginning August 18.
The four new indexes, the first of their kind, were created to meet the demands of institutional hedge fund investors seeking benchmarks that measure the performance of distinct volatility-based strategies.
Hedge funds that invest in volatility-based strategies differ dramatically from one another and often have exposures on completely opposite ends of the volatility spectrum — some funds may be net long volatility, some net short and others neutral. CBOE Eurekahedge Volatility Indexes group specific funds into one of the four indexes that best correspond with a particular strategy.
“Institutional investors are demonstrating an increased interest in volatility strategies,” noted Edward Provost, CBOE President and Chief Operating Officer. “These new indexes respond to that trend and will allow investors to more accurately gauge the performance of comparable funds.”
The CBOE Eurekahedge Volatility Indexes, which will be updated monthly, comprise a broad array of U.S.- and international-based funds in the volatility space. They include funds offered by firms that are well-known in the sector: 36 South Capital Advisors, Argentiere Capital, Artemis Capital Management, Assenagon Asset Management, BlueMountain Capital Management, Capstone Investment Advisors, Dominice & Co Asset Management, Fortress Investment Group, Harvest Volatility Management, JD Capital Management, Man Investments, Mariner Investment Group, Parallax Volatility Advisers and Picton Mahoney Asset Management.
The CBOE Eurekahedge Volatility Indexes are equally weighted among their constituent funds and most have been reconstructed by Eurekahedge since 2005 using a rules-based methodology (CBOE Eurekahedge Tail Risk Index is reported from 2008). The current combined assets under management (AUM) of the constituent funds exceed $50 billion as of June 2015
Descriptions of the CBOE Eurekahedge Volatility Indexes follow (Note: The number of funds within the indexes can vary throughout the month as funds disseminate returns.):
- CBOE Eurekahedge Short Volatility Index (Bloomberg Ticker: EHFI450) — The short volatility index is an equally weighted index of 15 constituent funds designed to provide a broad measure of the performance of underlying hedge fund managers who take a net short view on implied volatility with a goal of positive absolute return. The strategy often involves the selling of options to take advantage of the discrepancies in current implied volatility versus expectations of subsequent implied or realized volatility.
- CBOE Eurekahedge Long Volatility Index (Bloomberg Ticker: EHFI451) — The long volatility index is an equally weighted index of 10 constituent funds designed to provide a broad measure of the performance of underlying hedge fund managers who take a net long view on implied volatility with a goal of positive absolute return.
- CBOE Eurekahedge Relative Value Volatility Index (Bloomberg Ticker: EHFI452) — The relative value volatility index is an equally weighted index of 39 constituent funds designed to provide a broad measure of the performance of underlying hedge fund managers that trade relative value or opportunistic volatility strategies. Managers utilizing the strategy can pursue long, short or neutral views on volatility with a goal of positive absolute return.
- CBOE Eurekahedge Tail Risk Index (Bloomberg Ticker: EHFI453) — The tail risk index is an equally weighted index of 8 constituent funds designed to provide a broad measure of the performance of underlying hedge fund managers who specifically seek to achieve capital appreciation during periods of extreme market stress.
The names of the funds and the aggregate performance of each index will be publically accessible on Eurekahedge’s (www.eurekahedge.com/indices/hedge_fund_volatility_indices) and CBOE’s (www.cboe.com/Eurekahedge) websites. However, the performance of individual constituent funds will not be public. Only subscribers to Eurekahedge’s database who are accredited, professional and/or qualified investors (as defined in the jurisdiction of the user) will be allowed to access the individual performance data used by Eurekahedge to create the indexes.
CBOE is the leading exchange in the volatility space and home of the widely followed CBOE Volatility Index® (VIX® Index), the premier barometer of investor sentiment and stock market volatility. CBOE offers a suite of more than three dozen volatility-related products and benchmarks based on the VIX Index, including VIX options and futures contracts, which can be traded at CBOE and CBOE Futures Exchange (CFE®), respectively.
Eurekahedge is the world’s largest independent data provider and alternative research firm specializing in hedge fund databases. A subsidiary of Mizuho Bank, the second largest financial services group in Japan, Eurekahedge’s alternative asset funds databases are updated monthly and cover North America, Europe, Asia and Latin America. In addition to market-leading hedge fund databases and analysis, Eurekahedge’s business functions include hedge fund publications, due diligence services, investor services and an analytical platform service.