Drawing on the public market equity tracker model, where half of US equity assets are passively invested, the platform has the potential for significant scale as it looks to take a share of the USD3 trillion-plus hedge fund market, as well as bring new investors into the asset class.

The establishment of the platform will allow ASI to launch products which track HFR’s flagship investable index the ‘HFRI 500’; a fund weighted index comprised of 500 investable hedge funds across a broad range of strategies calculated and published by Hedge Fund Research Inc. (HFR), the established leader in hedge fund indexation.

The flagship HFRI 500 index tracking strategy is targeting an initial fundraising of USD500m by May 2021 and will have an investment capacity in excess of USD50 billion.

The platform will also subsequently allow access to HFR’s investable index family, with circa 30 underlying investable hedge fund strategy, sub-strategy and thematic indices giving investors the opportunity to choose those most suited to their needs.

This is the latest development following a partnership formed in 2019 between ASI and HFR which will see the launch of a series of products on ASI’s dedicated index tracking platform. The platform provides allocators access the performance of HFR’s investable hedge fund indices by physically investing in the underlying index constituents.

This approach has already spawned two innovative products, the HFRX Macro/CTA strategy which launched in the US in November 2020 with a commitment from a large institutional client. Meanwhile in Europe the partnership resulted in the launch of a strategy tracking the HFRI-I liquid alternatives index (which was funded in February 2019).

Russell Barlow, global head of alternative investment strategies at Aberdeen Standard Investments, said: “Our partnership with HFR means we are able to launch genuinely innovative benchmark tracking products. Before now products that attempted to track hedge fund benchmarks were both narrow in scope and the implementation approach resulted in investment outcomes that deviated from the return of the hedge fund industry.

“The funds available on the ASI index tracking platform are able to address these issues by physically owning each underlying fund benchmark constituents at the index weights, helping overcome the historical impediments. The platform not only allows allocators to ‘own’ the benchmark but it will also allow them to express strategy, sub-strategy and thematic views in a pure way. By doing so they can avoid the variability in return outcome comes from the idiosyncratic views expressed by a single fund.

“If the allocator thinks the opportunity set for Global Macro looks attractive they can now own the benchmark as a clean way to express that strategy view.”

Joseph Nicholas, founder and chairman of HFR, added: “We are pleased to support the launch of this landmark advancement for the hedge fund industry. For the first time investors can access HFRI Benchmarks through a family of index trackers. The flagship HFRI 500 index is a global, equal-weighted benchmark comprised of the largest hedge funds that report to the HFR Database which are open to new investment and offer quarterly liquidity or better.

“It offers clients a benchmark that’s more representative of the hedge fund industry return while also allowing tracking products to deliver the return of the index as a gateway to investing in a broad, diversified set of hedge fund strategies from some of the most prominent managers in the world.”