Bloomberg and Goldman Sachs Asset Management (GSAM) have launched a suite of 21 alternative risk premia indices, which represent a systematic portion of dominant hedge fund strategies and seek to capture returns for taking exposure to known risk factors. 

The Bloomberg GSAM Risk Premia Indices, available through the Bloomberg Terminal, are replicable, transparent and represent investment styles for which there is practitioner consensus, supporting academic research and empirical evidence, and commonly-accepted factor definitions. They combine Bloomberg’s experience in systematic strategies research with the field expertise and research insights from GSAM’s Quantitative Investment Strategies team, as well as valuable feedback from asset owners and consultants.

The new indices cover standard “macro” risk premia factors (value, carry, and trend) in liquid asset classes (FX forwards, bond futures, equity futures, and commodity futures), and cash equities based “micro” equity factors (value, low risk, quality and momentum).

Alternative risk premia strategies are designed to bring investors the benefits of return diversification, liquidity, transparency, systematic exposure and cost efficiency. In addition to using individual risk premia factors, investors can construct a portfolio of multiple risk premia factors in tandem, thereby customizing benchmarks to suit their individual investment objectives.

“As investors increasingly look for alternative sources of returns, we’ve seen more use of alternative risk premia strategies in investment portfolios, but investors are struggling with benchmarking performance,” Dave Gedeon, global head of equity and strategy indices at Bloomberg, said in a statement. “GSAM is a pioneer in alternative risk premia, and its expertise – coupled with Bloomberg’s strength in researching, developing and managing cross-asset strategy indices – enables us to provide investors with the tools for benchmarking risk premia strategies and creating new financial products.”

“These indices are designed to do for alternative risk premia what market capitalization has done for equities – provide a benchmark based on consensus definitions against which manager performance can be measured,” notes Matthew Schwab, managing director and co-head of research, portfolio management and portfolio construction for the Alternative Investment Strategies (AIS) team within GSAM’s Quantitative Investment Strategies group. “By being transparent and replicable, these indices can be used both to understand performance as well as to provide low-cost beta to the asset class.”

“Given Bloomberg’s history as an index provider, and our experience in the alternative risk premia space, we felt this was a natural partnership to bring risk premia factor benchmarks to the market,” adds Federico Gilly, GSAM managing director and co-head of research, portfolio management and portfolio construction for the AIS team.

Bloomberg’s authorized index administrator, Bloomberg Index Services Limited, is responsible for calculation, governance and licensing of the new indices.