GlobeOp Financial Services (LSE:GO.) will launch an independent, asset-weighted hedge fund performance index on May 15, 2012. The latest in a series of monthly GlobeOp hedge fund indices, it is transparent, consistent in underlying funds and data processing, and free from selection and survivorship bias.
“The GlobeOp Hedge Fund Performance Index offers a timely and true reflection of the aggregated return on capital invested in funds on our administration platform,” said Hans Hufschmid, chief executive officer, GlobeOp Financial Services. “The Index does not overstate exposure to, or the contribution of, any single strategy to aggregated hedge fund performance. Its correlation to many popular equity indices – such as the S&P 500 and the MSCI World Index – is therefore substantially lower than other widely followed hedge fund performance indices. Since its 2006 inception date, the GlobeOp Hedge Fund Performance Index has had a correlation of approximately 25% to 30% to these equity market indices. Fund managers and investors will find the early fund performance benchmarking useful. Both will gain comfort from the data consistency and independence, and from the preservation of individual client confidentiality.”
The GlobeOp Hedge Fund Performance Index will report on actual fund performance data independently collected from clients for whom GlobeOp provides monthly administration services.
- On the 10th business day of each month, the Performance Index will provide a flash estimate of the aggregate gross performance (net of management but not incentive fees) of funds administered by GlobeOp
- Interim and final values, both gross and net of management and incentive fees, will be provided in each of the two following months, respectively
- The GlobeOp Hedge Fund Performance Index inception date is January 1, 2006
Although individual fund data is anonymized by aggregation, Performance Index data will be based on the same reconciled fund data GlobeOp uses to calculate fund net asset values (NAVs). These rigorous processes are included in GlobeOp’s annual SOC 1 Type II examination. Online data charts can be segmented by gross and net performance, and by time periods – useful for investors or fund managers constructing their own performance benchmarks. GlobeOp’s total assets under administration represent approximately 10 percent of the estimated assets currently invested in the hedge fund sector. The investment strategies of the funds in the GlobeOp Indices span a representative industry sample.
Data for middle and back office clients who are not also fund administration clients is not included in any of the GlobeOp Indices, but is included in the company’s results announcement figures.
Commenting on the new index’s methodology, Tony Glickman, GlobeOp head of Client Solutions, said, “The Performance Index completes the picture of fund and investor behavior provided by the GlobeOp Hedge Fund Index family. Fund managers, asset allocators, fund investors and academics welcomed the GlobeOp Hedge Fund Performance Index in its trial phase, both as an early monthly benchmark and as independent data with a low correlation to many equity benchmark indices. Like our Capital Movement Index and Forward Redemption Indicator, the Performance Index is calculated by GlobeOp from monthly administration client data. Snapshots are taken at the same point in time each month and use a consistent methodology, eliminating the self-selection and self-reporting biases of many other indices. In addition, because data is reported within days of the business month-end, the delay factor inherent in some other indices is eliminated.”
Dr. Stuart Turnbull, Bauer Chair Professor, Bauer College of Business, University of Houston, TX , said, “The family of indices introduced by GlobeOp provides investors with an independent, transparent, timely and accurate measure of aggregate fund performance and investor activity with respect to subscriptions and redemptions. The independent nature of the GlobeOp Hedge Fund Performance Index avoids the ‘backfill’ bias caused by funds deciding whether or not to report their returns. This family of indices is a most welcome and needed addition to the tools used by analysts in studying hedge fund performance.”