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24 Sep 2008

SGAM Launches Hedge Fund Replicant

SGAM (Société Générale Asset Management) Alternative Investments launched the SGAM ETF T-Rex (for total return exposure), on Euronext Paris.

"It is possible to build a portfolio of dynamic strategies designed to replicate overall allocations in the hedge funds industry," SGAM says, "and thus attempt to replicate performances by taking up equivalent positions in these asset classes."

The portfolio invests in the main asset classes of equities, bonds and currencies, and is managed dynamically using liquid financial instruments such as futures. The new fund has no minimum subscription, and offers real-time liquidity and total transparency. Launched in a mutual fund format in August 2007, the strategy in an ETF format offers investors a choice between the subscription/redemption channel of a traditional fund and the flexibility of a real-time stock market negotiation via the ETF.

"Based on the concept of alternative beta, involving the replication of estimated hedge fund allocations in traditional asset classes," SGAM says, "academic studies show that hedge fund investments can on the whole be broken down into long/buy positions and short/sell positions in traditional asset classes."

The allocation process of the SGAM ETF T-Rex portfolio is based on a quantitative model, created by SGAM AI's structured asset management team. The model automatically calculates the allocation that optimises correlation to the index, composed of more than 2,000 hedge funds tracked in the HFR database. Positions are reviewed every month.

Société Générale Asset Management had EUR 309 billion ($452 billion) in assets under management at the end of June, including EUR 50 billion ($73.2 billion) in alternative investments.

SGAM Index is a wholly owned Société Générale Asset Management subsidiary that offers passive management, differentiated index management, structured ETFs and alternative beta products, and whose funds are commercialised by SGAM Alternative Investments.