Hedge fund analysis firm HFR and Barclays Capital have joined forces to offer the first transparent pricing of hedge fund-linked tradable options. Based on the HFRX Global Hedge Fund Index, Barclays will offer a two-way market in European call options to its institutional clients and counterparties. Indicative pricing of the options will be available during London market hours on both Bloomberg and Reuters.
The companies say they have sought to add transparency and liquidity to the fund-linked derivatives market, to enable institutional investors, retail distributors, private banks and market counterparties to benefit from real-time pricing and standardised product terms. The options will be available in euros, US dollars, sterling, yen and Swiss francs with a minimum dealing threshold of 500 contracts or US$500,000 and will initially have maturities from one to five years, with additional maturities and strike prices being added subject to market demand.
“The development of a transparent and standardised hedge fund-linked options market will empower a broader spectrum of investors to access the alternative investment universe,” says Antti Suhonen, head of fund-linked derivatives structuring at the bank. “Barclays Capital is committed to improving market efficiency by increasing price transparency and selected the HFRX Index as the underlying index for these standardised options based on its liquidity and recognition as a benchmark index in hedge fund investing.”
John Godden, managing director of HFR, adds, “The creation of the tradable option program on the HFRX Index by Barclays Capital is another important milestone in the development of accessible, practical products that provide useable exposure to hedge fund returns at a time when institutional investor interest and involvement is stronger than ever. Barclays Capital has underlined its position as one of the most forward-thinking players in the fund-structuring world.”