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Aberdeen Goes Passive in Hedge Fund Markets

The asset manager will soon give clients access to hedge fund gains through passive investing.

Aberdeen Standard Investments is pushing into the hedge fund market with a series of passive investment offerings.

The firm said Thursday it has signed an agreement with Hedge Fund Research under which Aberdeen will soon offer an investment product tracking an index comprised of 500 hedge funds across strategies. The registered investment vehicle will later provide access to a wide group of HFR indexes so investors may choose from about 30 strategies and sub-strategies. 

“This partnership allows for a new benchmark for passive strategies in the hedge fund space,” said Russell Barlow, global head of alternative investment strategies at Aberdeen, in the statement. “Traditional methods of creating hedge fund benchmarks have tended to fall short of the requirement to be investable or have resulted in sub-optimal tracking errors.”

Aberdeen is trying to attract investors with offerings beyond traditional asset classes after its parent Standard Life Aberdeen saw strong interest in alternatives during the first half of this year. Aberdeen merged with Standard Life in 2017, a deal making the firm the largest asset manager in the U.K. as it sought to stem the outflows plaguing traditional active managers.

“We know from speaking to our clients that many of them see the benefits of accessing the returns available in the hedge fund space through a passive format so we expect there to be healthy demand for the strategies that this partnership will create,” Barlow said in the statement.

[II Deep Dive: Standard Life Aberdeen Sees Rise in Outflows After Merger]

Passive investment funds that track indexes such as the S&P 500 have seen assets soar as investors pile into them for their low cost and strong performance trends. HFR created its indexes with the approach typically seen in the equity and bond industries, where investors physically own the underlying assets held in the benchmark, according to Aberdeen.

Investors will need at least an initial investment of $5 million in order to access the asset manager’s new hedge fund offering. 

The collaboration with Aberdeen is “a historic strategic milestone across the alternative and traditional asset management industries,” said Joseph Nicholas, founder and chairman of HFR, in the statement.

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