HFRX Index Methodology

HFR utilizes a UCITS compliant methodology to construct the HFRX® Hedge Fund Indices. This methodology includes robust classification, cluster analysis, correlation analysis, advanced optimization and Monte Carlo simulations.

Production of the HFRX Methodology results in a model output which selects funds that, when aggregated and weighted, have the highest statistical likelihood of producing a return series that is most representative of the reference universe of strategies. In addition, the HFRX Methodology defines certain qualitative characteristics, such as: whether the fund is open to transparent fund investment and the satisfaction of the index manager's due diligence requirements.

HFR offers three HFRX Index series: the daily-reporting HFRX Indices (UCITS) which are comprised of liquid alternative UCITS funds, the monthly-reporting HFRX Indices (Flagship Funds) which are comprised of private hedge funds and the HFRX ESG Indices which utilize an ESG framework.

About the Index

The HFRX Global Hedge Fund Index® is comprised of funds representing all main hedge fund strategies. The underlying strategies are asset weighted based on the distribution of assets in the hedge fund industry.

The values for the HFRX EUR, JPY, CHF, CAD and GBP FX Indices are calculated by applying to the USD index value the cost of a rolling monthly foreign exchange contract on the relevant currency. All HFRX Indices are re-balanced quarterly.

To be included in the HFRX Indices a hedge fund must:

• Report performance net of all fees in USD 
• Be active and accepting new investments
• Have minimum 24 months track record
• Have no Investor-Level gates or have agreed to waive them
• Have no lock-ups or have agreed to waive them
• Accept both US and non-US capital (or there is a separate fund for US and non-US investors)
• Be managed by an investment company registered with the SEC or similar regulatory body
• Agree to the Submitter Code of Conduct (SCOC)
• Offer commercial terms consistent with market standards
• Have at least $50 million in assets under management

• Meet the following liquidity requirements:
• Redemptions
• HFRX Indices - Flagship Funds: Provide quarterly liquidity or better
• HFRX Indices – UCITS Funds : Provide bi-weekly liquidity or better
• Redemption Notice Period
• HFRX Indices - Flagship Funds: Have a redemption notice period of 90 days or less
• HFRX Indices – UCITS Funds: Have a redemption notice period of 7 days or less
• Subscriptions
• HFRX Indices - Flagship Funds: allow for monthly subscriptions
• HFRX Indices – UCITS Funds: allow for daily subscriptions
• Subscription Notice Period
• HFRX Indices - Flagship Funds: have a subscription notice period of 30 days or less
• HFRX Indices – UCITS Funds: have a subscription notice of 7 days or less
• Redemption Settlement Period
• HFRX Indices - Flagship Funds: have a redemption settlement of 30 days or less
• HFRX Indices – UCITS Funds: have a redemption settlement of 14 calendar days or less

Meet the criteria for inclusion as determined by a rigorous quantitative selection process:

• Cluster and correlation analyses are performed to group managers by true strategy categories and to eliminate outliers
• Monte Carlo Simulation helps determine the adequate number and types of managers to replicate each strategy
• Selected managers must provide transparency and pass extensive qualitative screening
• Funds are then weighted to maximize representation with their group

CORRECTION NOTICE: July 2023 performance of the HFRX Diversity Index was revised from +1.46% to +1.87% on September 7, 2023.