It was the second such hedge fund index to be launched by a Wall Street firm in 2006. Merrill Lynch launched the ML Factor Index in April for institutional investors. This emulates the behaviour of well-known hedge fund industry benchmarks using a dynamic portfolio that includes the S&P500, the Russell 2000, Morgan Stanley’s EAFE and Emerging Markets free indices, the US Dollar index and one-month Libor.
“We have a rules-based algorithm that tracks the behaviour of these benchmarks, which basically represents hedge fund beta,” says Steve Houston, a managing director in Merrill Lynch’s global markets division, and head of structured products in the Americas.
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