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MPI and Barclayhedge join forces to launch hedge fund index business

Monday, March 12, 2018
Opalesque Industry Update - Markov Processes International (MPI), a leading provider of investment research, technology and analytics for the global investment management industry, today announced the launch of its next-generation hedge fund index business, MPI Hedge Fund Indices. The new business line aims to deliver better benchmarks for measuring elite hedge fund performance and to enable exposure to those benchmarks through transparent, highly liquid, investable tracker indices.

Each MPI hedge fund index is comprised of two components, one benchmark index that provides a better measure of performance for a targeted set of premier hedge funds, and one tracker index that aims to deliver the performance of the benchmark using liquid, transparent exchange-traded funds. All MPI investable tracker indices are constructed using MPI's patented Dynamic Style Analysis™ model (DSA), which is used to more precisely capture the dynamic mix of market factors that drive hedge fund returns over time.

MPI's index construction approach represents a logical evolution in the history of hedge fund performance tracking. First generation hedge fund indices sought to measure the performance of the entire industry, which introduced biases that skewed results. MPI's Hedge Fund Index 2.0 model seeks to correct for this shortcoming by targeting elite subsets of hedge funds to create a more stable, accurate gauge for measuring performance.

"The Hedge Fund Index 2.0 model is the product of MPI's more than 25 years of experience analyzing complex and opaque investment strategies," said Rohtas Handa, EVP and Head of Institutional Solutions at MPI. "We are now combining that experience with our patented dynamic factor model, DSA, to build better benchmarks for hedge fund performance."

The first index to launch under the new MPI business line is MPI Barclay Elite Systematic Traders Index (Bloomberg: MPBEST20), which seeks to capture the returns of the 20 largest systematic managed futures hedge funds reporting into BarclayHedge, MPI's partner for the index. The MPBEST20 is paired with the MPI BEST 20 Tracker Index (Bloomberg: MBEST20T). The MPBEST20 was developed to meet the demands of investors seeking a more selective benchmark representative of hedge fund strategies that have performed well in volatile and/or down equity markets.

"We are delighted to be working with MPI to launch the MPBEST20 Index," said Sol Waksman, President at BarclayHedge. "We've been approached in the past by firms looking to deliver on a similar promise. In those cases, and despite valiant efforts, index performance quality fell short of our standards. MPI, however, has delivered what we think will be a gamechanger."

MPI's Hedge Fund Indices business launch follows the construction of the firm's first hedge fund index, the Eurekahedge 50 (Bloomberg: EHFI400) and the MPI Eurekahedge 50 Tracker Index (Bloomberg: EHFI401). This index, which was launched in 2014 in partnership with Eurekahedge, was developed to provide a measure of the world's 50 most successful hedge funds, and a more representative benchmark for institutional portfolios of hedge funds that seek consistently attractive risk-adjusted returns.

MPI's hedge fund tracker indices data can be licensed to build investment products.

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