Royal Bank of Canada’s Alternative Assets Group has launched its own investible hedge fund index, the RBC Hedge 250 Index. The 250 funds ...

Royal Bank of Canada’s Alternative Assets Group has launched its own investible hedge fund index, the RBC Hedge 250 Index.

The 250 funds represented in the new index capture approximately 20 per cent of total hedge fund assets under management, including many funds that are closed to new investors, have longer lock-up provisions or have recently launched operations.

According to RBC the new index contains up to six times the number of funds referenced by other investible indices.

"We have capitalized on RBC's significant experience and relationships in the industry to create the RBC Hedge 250 Index which we believe to be the most representative investible hedge fund index in the market. There has been a great need in the market for an investible hedge fund index which does a better job of representing the performance of the asset class," said Winson Ho, co-head of the Alternative Assets Group and co-creator of the index.

The new index screens funds from a universe of 4,700 funds and follows a set of rules to direct and adjust the composition of the index over time.

According to the bank, unlike other investible hedge fund indices, the RBC Hedge 250 Index references actual hedge funds and not separately-managed accounts. This makes it possible to include a wide range of funds and managers, and not just those that are the most liquid and accessible.

"Since its inception in July 2005, the RBC Hedge 250 Index has had a net return of approximately 9 per cent," said Mr Ho.

In comparison, over the same period, non-investible indices have averaged 10 per cent while the other investible indices have averaged 5.5 per cent, according to Mr Ho.

The new index categorizes hedge funds across 9 strategies in 4 sectors.