Categorizing Volatility-Based Strategies Seen Key to Effectively Analyzing Hedge Funds Performance
CHICAGO, IL and BONITA SPRINGS, FL -- February 29, 2016 -- Chicago Board Options Exchange® (CBOE®) today announced the release of a white paper that analyzes the use of benchmarks, such as those utilized by the CBOE Eurekahedge Volatility Indexes, to measure the effectiveness of volatility-based hedge funds in diversified portfolios.
In the paper planned to be presented tomorrow at the 32nd annual CBOE Risk Management Conference (RMC) U.S. in Bonita Springs, Florida, Christopher DeMeo, founding partner of Nu Paradigm Investment Partners LLC, noted that unlike other volatility-based hedge fund indexes, the new CBOE Eurekahedge Volatility Indexes differentiate funds by specific investment goals. Volatility strategies are distinct and non-homogeneous, making it critical to segregate them into categories to effectively analyze and properly benchmark performance, DeMeo said.
Before these new indexes had been introduced, Lack of consistent methodology and construction (had) complicated the due diligence process by making it difficult for investors to gauge how a manager performed relative to a truly representative index, DeMeo said. The CBOE Eurekahedge Volatility Indexes delineate the source of returns in volatility-based investments, making it easier to benchmark hedge funds performance, he said.
The CBOE Eurekahedge Volatility Indexes track 77 unique strategies with combined assets under management of more than $50 billion. Available on the CBOE and Eurekahedge websites since August 18, 2015, the indexes are equally weighted among their constituent funds and offered in four distinct buckets:
- CBOE Eurekahedge Long Volatility Index, designed to provide a broad measure of the performance of underlying hedge fund managers who take a net long view on implied volatility with a goal of positive absolute return. 12 Constituents
- CBOE Eurekahedge Short Volatility Index, designed to provide a broad measure of the performance of underlying hedge fund managers who take a net short view on implied volatility with a goal of positive absolute return. 16 Constituents
- CBOE Eurekahedge Relative Value Volatility Index, designed to provide a broad measure of the performance of underlying hedge fund managers that trade relative value or opportunistic volatility strategies. 40 Constituents
- CBOE Eurekahedge Tail Risk Index, designed to provide a broad measure of the performance of underlying hedge fund managers that specifically seek to achieve capital appreciation during periods of extreme market stress. 9 Constituents
The names of the funds covered by the indexes and the aggregate performance of each index are available at www.eurekahedge.com/Indices/CBOE A link to the white paper, Differentiating and Benchmarking Volatility-Based Investment Strategies Utilizing the CBOE Eurekahedge Volatility Indexes, can be found at www.cboe.com/eh.
About Eurekahedge
Eurekahedge is the worlds largest independent data provider and alternative research firm specializing in hedge fund databases. A subsidiary of Mizuho Bank, the second largest financial services group in Japan, Eurekahedges alternative asset funds databases are updated monthly and cover North America, Europe, Asia and Latin America. In addition to market-leading hedge fund databases and analysis, Eurekahedges business functions include hedge fund publications, due diligence services, investor services and an analytical platform service. For more information please visit www.eurekahedge.com.
About CBOE
CBOE, the largest U.S. options exchange and creator of listed options, continues to set the bar for options and volatility trading through product innovation, trading technology and investor education. CBOE Holdings offers equity, index and ETP options, including proprietary products such as options and futures on the CBOE Volatility Index (VIX Index) and S&P 500 options (SPX), the most active U.S. index option. Other products engineered by CBOE include equity options, security index options, Weeklys options, FLEX options and benchmark products such as the CBOE S&P 500 BuyWrite Index (BXM). CBOE Holdings is home to the world-renowned Options Institute, Livevol options analytics and data tools, and www.cboe.com, the go-to place for options and volatility trading resources.
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CBOE®, Chicago Board Options Exchange®, Execute Success®, CBOE Volatility Index®, Livevol®, FLEX® and VIX® are registered trademarks, and BuyWriteSM, BXMSM, WeeklysSM and The Options InstituteSM are service marks of Chicago Board Options Exchange, Incorporated (CBOE). Standard & Poor's®, S&P® and S&P 500® are registered trademarks of Standard & Poor's Financial Services, LLC and have been licensed for use by CBOE.All other trademarks and service marks are the property of their respective owners.
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