State Street Global Advisors (SSGA) has launched its State Street Global Alternative Beta Fund, which seeks to approximate the returns of hedge funds as a broad asset class.

It is registered in the UK, Ireland, Netherlands, Luxembourg, Sweden, Finland, Norway and Denmark, and has been seeded with an initial £123m investment from Quilter Investors.

The fund is managed in reference to the HFRX Global Hedge Fund Index, representing a range of hedge fund strategies such as equity hedge, event driven, macro/commodity trading adviser and relative value arbitrage.

SSGA’s fund aims to approximate hedge funds’ beta returns, largely driven by various market exposures and approximate the risk/return profile of the asset class though a dynamic factor-based investment process.

This strategy seeks to determine which market factors have been driving recent hedge fund returns and to dynamically replicate those exposures.

SSGA said that this strategy would increase liquidity relative to directly investing in hedge funds, and by replicating hedge fund beta returns through a systematic process costs are reduced.

The launch of the fund will allow investors across EMEA to access the strategy more easily, with the aim of making the asset class more accessible to a wider range of investors.

“This new fund launch gives investors exposure to a diversified set of hedge fund returns through a repeatable investment process and daily liquidity,” said SSGA EMEA head of multi-asset portfolio management, Frédéric Dodard.

“This allows our clients to access this asset class in a scalable way and without the traditional constraints typically associated with hedge fund investing, such as high costs or illiquidity.”

Quilter Investors portfolio manager, Sacha Chorley, added: “We’re pleased to partner with SSGA to offer our passive fund of fund clients access to the diversification benefits of alternatives.

“Alternatives are a key component of our portfolio construction, as they complement more traditional risk diversifiers of cash and bonds and have proven to reduce the drawdown risk of multi-asset investments in volatile markets.

“Historically, there has been a lack of availability of passive exposures of the alternatives universe, and SSGA has developed a unique replication methodology that captures the essence of the alternatives universe with minimal complexity. We are excited to work with SSGA to bring this innovative solution to our clients.”

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