As discussed in the January 2010 edition of The Hedge Fund Journal we see the rise in importance of UCITS hedge funds as a response to the evolution of investor needs and the maturing of the hedge fund industry. However, as with most evolutions, the path is not in a straight line and there are various discontinuities and challenges on the way. The entry of UCITS hedge funds into the mainstream is no different and there are various challenges that will need to be resolved over the coming years. One that we have identified is the need for a clear and complete mapping of the fund universe and a concise investment framework. In creating the UCITS Hedge-Tomlinson indices we believe we have provided one of the first steps in this process.

Our first initiative has been to research the fund universe and create a set of categorisations that we believe reflect the investment proposition of the funds. Our overall categorisation structure takes in a composite index, six strategy specific indices and an additional six sub-strategy indices. These are displayed in figure 1 below. However, simply creating the categorisations is only one part of the challenge – you also need to define what funds are included and other indexation rules. We have developed the following methodology for the construction of the UCITS Hedge-Tomlinson Indices.

Over the coming months we will be publishing updates, index performance and a host of other information at our new online portal www.ucitshedgefunds.com. If you have any thoughts or insights on our project please feel free to get in touch. Please continue to check in on our progress, as we aim to provide a value-added service, conducting useful analysis and offering unique content.

Methodology
This document comprises the Index Rules for the UCITS Hedge-Tomlinson Indices and defines the procedures for its construction and calculation. UCITS Hedge-Tomlinson Indices are equal-weighted, calculated on the last business day of every week, and published on a T+3 schedule at www.ucitshedgefunds.com.