State Street Global Advisors, the asset management business of State Street Corporation (NYSE:STT) has announced the launch of the State Street Global Alternative Beta Fund, which seeks to approximate the returns of hedge funds as a broad asset class.
The State Street Global Alternative Beta Fund is managed in reference to the HFRX Global Hedge Fund Index, provided by HFR. The Index represents a broad range of hedge fund strategies including equity hedge, event driven, macro/commodity trading advisor and relative value arbitrage. It is a widely recognized benchmark for hedge funds and is representative of the asset class.
The State Street Global Alternative Beta Fund aims to approximate hedge funds’ beta returns driven, to a large extent, by various market exposures and approximate the risk-return profile of the asset class through a dynamic, factor-based investment process.
The strategy aims to determine which market factors have been driving hedge fund returns recently and dynamically replicates those exposures. This strategy increases liquidity relative to directly investing in hedge funds, and by replicating hedge fund beta returns through a systematic process, costs are reduced.
The fund, which is registered in the UK, Ireland, Netherlands, Luxembourg, Sweden, Finland, Norway and Denmark, has been seeded with an initial £123m investment from Quilter Investors.
State Street Global Advisors has over eight years of experience in hedge fund replication and the launch of the fund will allow investors across EMEA to access the strategy more easily. The aim is to make the asset class more accessible to a wider range of investors, in a cost-efficient, liquid and transparent manner.
Sacha Chorley, Portfolio Manager at Quilter Investors, commented:
“We’re pleased to partner with SSGA to offer our passive fund of fund clients access to the diversification benefits of alternatives. Alternatives are a key component of our portfolio construction, as they complement more traditional risk diversifiers of cash and bonds and have proven to reduce the drawdown risk of multi-asset investments in volatile markets.”
“Historically, there has been a lack of availability of passive exposures of the alternatives universe, and SSGA has developed a unique replication methodology that captures the essence of the alternatives universe with minimal complexity. We are excited to work with SSGA to bring this innovative solution to our clients.”
Frédéric Dodard, EMEA Head of Multi-Asset Portfolio Management at State Street Global Advisors, commented:
“This new fund launch gives investors exposure to a diversified set of hedge fund returns through a repeatable investment process and daily liquidity. This allows our clients to access this asset class in a scalable way and without the traditional constraints typically associated with hedge fund investing, such as high costs or illiquidity.”
