VTI, with its correlation of 60 funds, will track the larger 15-year Van Global Hedge Fund Index. Utilizing a strategy of weighting to represent their weighting in the “real” universe will then further enhance this correlation, the company said. When strategy weightings change in the hedge fund universe, the VTI strategy weightings will be changed to reflect changes in the universe. So, as the hedge fund universe changes its strategy mix to better cope with changing market conditions, so will the VTI.
While the basic VTI will use proportional weighting as described above, the structure of the VTI offers users flexibility, including:
- Choice among strategy-proportional weighting, dollar/capitalization weighting and equal weighting for creation of investable products.
- Ability to “strategy-tilt” the VTI (over- and/or under-weight certain strategies)
- Ability to custom-design different products from among the 60-plus funds and 18 strategies and sub-strategies of the VTI.
Overall, Van’s database includes 4,400 hedge funds, which tracks data back to 1988. These funds are then further divided into 18 strategies and sub-strategies.