MSCI Reshuffles Hedge Fund Invest Index

January 5, 2004 ( - Hedge fund index provider MSCI has concluded its second quarterly Hedge Invest Index constituent review, which will result in the number of constituent funds increasing to 82 from 74.

The MSCI Hedge Invest Index, launched in July 2003 (See MSCI, Lyxor Launching Investable Hedge Fund Index ), will also be increasing the number of hedge fund investment processes and strategies.   The number of processes will increase to 13 and the number of strategies will be upped to 20, according to a news release.

After the rebalancing, long bias will remain the most prevalent investment process, with eight constituents and a 21.90% target weight.   This will be followed by Arbitrage with 12 constituents and a 19.87% target weight and Systematic Trading, represented by 16 constituents and a 12.92% target weight.   Other constituents include:

  • No Bias – 16 components, 11.76% weight
  • Variable Bias – four elements, 7.93% weight
  • Discretionary Trading – seven constituents, 5.71% weight
  • Statistical Arbitrage – four components, 5.20% weight
  • Multi-process (RV) – two elements, 3.55% weight
  • Merger Arbitrage – seven parts, 3.38% weight
  • Event Driven – two components, 3.06% weight
  • Multi-process (MPG) – one constituent, 3.05% weight.

Short Bias and Multi-process (DT) with two and one constituent each, respectively, and 0.94% and 0.73% weighting, respectively rounded out the list.

MSCI conducts the review quarterly to incorporate three variables.  First, the realignment of the strategy weights of the investable hedge fund index taking into account changes to the strategy weights in the hedge fund universe, as represented by the broader MSCI Hedge Fund Composite Indices.  Second, the addition to the investable hedge fund index of newly available funds on the platform, which meet the constituent eligibility criteria.  Third, deletions from the investable hedge fund index of existing constituents that no longer meet the ongoing eligibility criteria.

Any changes resulting from the review will take effect as of the close of business on January 6, 2004.