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HFR World

In this episode of HFR World, Ken Heinz and S. Aneeqa Aqeel introduce the newly launched Interval Funds and Tender Offer Funds index families, highlighting their importance in the alternative investment landscape and how they provide benchmarks for semi-liquid and illiquid assets.

Chapters

00:00 Introduction to HFR Indices

00:32 Understanding Interval and Tender Offer Funds

02:24 Construction and Weighting of New Indices

 

Podcast Transcript

S. Aneeqa Aqeel (00:00)

Welcome back to HFR World. We are here today with President Ken Heinz to talk about a couple of new index families launched at HFR, namely the Interval Funds Index and the Tender Offer Funds Index families. Ken, welcome to the show.

 

Ken (00:16)

Thanks for having me on, Aneeqa

 

S. Aneeqa Aqeel (00:18)

So let’s dive right in, Ken. Can you explain the importance of interval funds and tender offer funds in alternatives today and how these new HFR indices fit into the hedge fund index landscape?

 

Ken (00:32)

Yeah, it’s super exciting. The new HFR indices offer transparent rules-based benchmarks for the growing interval funds and tender offer funds markets. The underlying funds represent convergence of private hedge funds with registered product and also convergence of market for both retail and institutional investors. Interval funds make powerful alternative strategies available to retail investors, which previously may have not been available. They allow hedge fund managers a wider capital base with liquidity profile, which is conducive to efficient operation of these sophisticated strategies. And again, these strategies typically cannot be offered in a standard daily 40 Act mutual fund.

Interval funds focus on private credit, real assets, structured credit, opportunistic income with liquidity at fixed intervals. Tender offers are for niche products, which are largely illiquid Both allow investors to come into investment opportunities not available to a wider market and therefore are hard to price.

Until now, the launch of these indices, there’s not been a widely recognized institutional benchmark for retail accessible, semi liquid, and illiquid alternative investments. These indices make closed end funds more accessible for retail investors rather than just institutional hedge fund partnerships and structures.

 

S. Aneeqa Aqeel (02:02)

Okay, so the a number of benefits there. We’re reaching more of the semi-liquid and illiquid investments and creating opportunities for people to benchmark those positions where no such benchmarks currently exist. So I guess the natural question is how are the new indices constructed and weighted?

 

Ken (02:24)

Absolutely. There’s a number of items to go over there. For both new index families, managers must, of course, adhere to HFR’s rigorous eligibility requirements and report data to HFR at least monthly are registered with investment authorities in their jurisdiction as interval or tender offer funds, respectively, and are dollar denominated.

We measure net of fee returns using actual manager reported performance. HFR provides equal and asset-weighted versions where weights evolve according to the position performance. We publish the aggregate index performance daily on a T plus one, the same with all of our daily index families.

And the interval funds contain over 120 positions contributed by over 85 managers to date. The tender offer funds index filters for funds with at least fifty million that are representative of unique strategy positions from a pool of over 200 tender offer funds.

 

S. Aneeqa Aqeel (03:24)

So compared to the broad industry bellwether, like the HFRI Fund Weighted Composite what do these more specialty indices contribute to the alts data environment?

 

Ken (03:37)

Yeah, Aneeqa in a nutshell, the new index families are much more targeted and thematic than the overall HFRI or HFRX or any of the other families of indices that we publish. The interval funds effectively capture performance trends in private credit oriented And obviously, private credit has become an area of intense scrutiny in the last couple of months.

Also income-oriented alternative strategies, semi-liquid private market products, retail accessible alternative structures, liquid private market allocations. That’s all on the interval funds. On the tender offer indices, they offer a benchmark for the illiquidity premium in niche private market assets such as for digital asset futures, fine art, or private secondaries.

 

S. Aneeqa Aqeel (04:32)

So how do you see these index families evolving and are these indices investable?

 

Ken (04:38)

Yeah, absolutely. The indices are investable benchmark indices as new eligible interval funds and tender offer funds come to market, we’ll include them into the index families.

 

S. Aneeqa Aqeel (04:51)

Okay. And what types of allocators or investors do you expect will benefit from these indices?

 

Ken (04:57)

Right. So investors of all type which are allocating to alternatives through wealth management or semi-liquid structures rather than traditional institutional hedge fund vehicles are the primary beneficiaries of this.

These can include a wide range of investor types, certainly RIAs, wealth managers that are seeking a benchmark for interval fund allocations.

Private banks, which are building alternative model portfolios. Also, multi-asset allocators comparing semi-liquid alternatives against hedge funds or private credit. Family offices using interval funds as liquidity managed alternative sleeves. Also defined contribution in retirement platforms exploring private market exposure in more accessible formats. And then finally product manufacturers and creators and platforms that need benchmarking and performance comparison tools.

 

S. Aneeqa Aqeel (05:57)

Wonderful. so if people want to learn more about this, namely wealth managers or investors, are these indices currently published on the HFR website?

 

Ken (06:07)

Yes, you can find all the information there at www.hfr.com

 

S. Aneeqa Aqeel (06:12)

Okay. That’s great. Thank you so much for your time. Appreciate it.

 

Ken (06:16)

Thanks, Aneeqa

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