Credit Suisse launches alt index fund

Credit Suisse launches alt index fund
New fund designed to offer the risk/return portfolio of the hedge fund industry; 'portfolio completer'
MAY 10, 2012
Credit Suisse Asset Management has launched a new alternatives fund that intends to deliver the returns of the Dow Jones Credit Suisse Hedge Fund Index. The Credit Suisse Liquid Alternative Fund Ticker:(CSQAX) will track the Credit Suisse Liquid Alternative Beta Index, an investable form of the Dow Jones Credit Suisse Hedge Fund Index, which is comprised of the monthly reported returns of approximately 450 hedge funds. Bob Alderman, head of retail distribution for Credit Suisse Asset Management in the Americas, called the fund a “portfolio completer,” thanks to its diversification benefits. Because the fund encompasses the majority of the hedge fund industry, the index includes long/short, merger arbitrage, event driven, and other hedge fund strategies. The index is also asset weighted, rather than equal weighted, which provides a more realistic glimpse at how the hedge fund industry is investing, said Mr. Alderman. Since the index relies on the reported returns of hedge funds, it does have a slight backwards-looking slant to it. But Jordan Drachman, head of research for Credit Suisse alternative beta strategies, said that while individual hedge funds can move in and out of markets very quickly, the overall industry tends to move much slower. Mr. Drachman also added that the fund takes away the risk of selecting a bad single manager. “You're not making a bet on a single manager and his strategy, you're making a bet on the collective wisdom of the hedge fund industry,” he said. The index has three-year annualized returns of 6% as of March 31. Credit Suisse is not the first firm to roll out a hedge fund replication fund. The IQ Hedge Multi-Strategy Tracker ETF Ticker:(QAI) follows a similar methodology, for example. With an expense ratio of 0.75% it's also about 100 basis points cheaper than the 1.70% expense ratio of Credit Suisse's fund. Mr. Alderman said that as the fund's assets drop he expects the expense ratio to fall accordingly.

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