HFR launches index to track $425 billion multimanager, pod shop hedge funds

HFR has launched a new hedge fund index to track one of the most highly watched areas of the hedge fund universe: multimanager pod shops.

The HFRI Multi-Manager/Pod Shop Index debuted Sept. 9 and the index was up 1.57% for August driven by equity and fixed income trading after a volatile month that included the unwind of the Japanese yen carry trade. The index is now up 5.51% year to date.

The launch of the index was spurred by increasing institutional investor interest and investment in multimanager pod shop funds, said Ken Heinz, president of HFR.

“With the sustained increase in volatility over the last four years and a growing propensity toward rapidly evolving micro-cycles, there is interest in these for the specialization and diversification they can provide, and at the same time for the institutional risk controls they are able to offer,” he said, in an email to Pensions & Investments.

The new index is comprised of approximately 36 constituents that utilize a multimanager, pod shop structure.

HFR defines the multimanager strategy as fund capital being “allocated to multiple independent investment teams” with the pods being “autonomous” but generally operating “within certain portfolio management or risk guidelines” and with capital that “is allocated to or from these pods in a discretionary manner under the supervision of a CIO.”

HFR estimates that multimanager hedge funds currently manage approximately $425 billion in assets. Equity hedge funds are the largest category at $1.3 trillion, according to HFR.

Multimanagers, such as the approximately $68.2 billion Millennium Management and $63 billion Citadel, have grown in recent decades to become some of the industry’s largest players managing billions of dollars and employing thousands.

Overall in August, hedge funds posted a 0.25% gain for the month with equity hedge and fixed income-based relative value arbitrage strategies leading the way, according to the HFRI Fund Weighted Composite Index.