Van announces hedge fund universe tracker fund

FOR IMMEDIATE RELEASE (Not For U.S. Use) VAN ANNOUNCES HEDGE FUND UNIVERSE TRACKER FUND NASHVILLE, TN, USA, February 6, 2003 Van Hedge Fund Advisors International, Inc. ("VAN") announced today the Van Tracker Fund ("VTF"), a fund of funds which tracks performance of the global hedge fund universe. "We are very excited about the VTF. The year 2002 was spent building it. In 2003, we plan to build worldwide distribution for it and are interested in exploring its use with potential distributors, institutional investors and other potential users, including producers of index derivative products," George Van, Chairman, stated. "We believe the VTF represents the ideal hedge fund investment product for institutions, individuals and funds of funds," he added. "Because it can be shown to represent the hedge fund universe, institutions such as pension funds, foundations and endowments can choose to use it as their core hedge fund product. Our goal is to have it provide performance, over time, equivalent to that of the hedge fund universe. This performance has been excellent over the last 15 years. "Many institutions either have not yet begun to invest in hedge funds, or are just beginning to. With this product, they needn't be concerned how an independent hedge fund, or a relatively small number of hedge funds, will perform. Instead, we believe they can take comfort in the VTF's broad diversification of strategies and funds. "Institutions already familiar with hedge funds can either remove or weight more or less heavily some of the 18 constituent strategies and sub-strategies. Similarly, they might choose to cluster around it either individual hedge funds or funds of funds of their choice. "We believe that qualified individuals too can enjoy hedge fund investment returns and the risk protection provided by the VTF's broad diversification of both strategies and managers. There are few investment alternatives that investors could find that measure up to the performance of the VTF's proxy predecessor portfolio which we show herein. "Funds of funds also may choose to use the VTF as a core product to represent the broad hedge fund universe. "We believe this product offers numerous attractive features not currently available in similar offerings now on the market." Van Tracker Fund Concept The VTF, as tested, tracks the larger 15-year Van Global Hedge Fund Index ("Van Index") with a high correlation, when 60 funds are used for the VTF. Therefore, it is reasonable to assume that the attractive 15- year record of the Van Index serves as a long proxy predecessor portfolio for the VTF. Further, Company management believes that both the Van Tracker Fund and the Van Index fairly represent the hedge fund universe because the returns of the Van Index are almost perfectly correlated with the much larger number of hedge funds in the VAN Database. With 4,400 hedge funds, Management believes the VAN Database provides a reasonable representation of the hedge fund universe. The chart below describes these relationships as of January 2003.1 VAN Hedge Fund Database (Representing the hedge fund universe) Over 4,400 hedge funds Van Global Hedge Fund Index ("Van Index") (Tracking the hedge fund universe) Approx. 1,200 funds currently reporting by month-end deadline Van Tracker Fund ("VTF") (Tracking the Van Global Hedge Fund Index) Minimum of 60 funds invested An important feature of the Van Global Hedge Fund Index is that it is one of the oldest hedge fund universe metrics. VAN began it in 1994 and published it in 1995, using constituent fund performance dating back to January 1, 1988. (The year 1988 was used as a beginning point because data available prior to 1988 was not adequately robust in numbers of funds by strategy.) Since 1994, therefore, for 9 of its 15 years, survivor bias has been mitigated. Van Tracker Fund Proxy Predecessor Portfolio The returns, standard deviation and Sharpe Ratio of the Van Index dominate those of standard market benchmarks, as shown herein. Van Index Performance vs. Major Benchmarks January 1, 1988 through December 31, 2002 Annualized Standard Sharpe Ratio Return Deviation Van Index 16.4% 9.2% 1.5 S&P 500 11.5% 15.5% 0.7 MSCI World Equity 4.8% 16.1% 0.3 Index Lehman Brothers 8.6% 4.4% 1.5 Aggregate Bond Index © 2003 by Van Hedge Fund Advisors International, Inc. and/or its licensors, Nashville, TN. Thus, the proxy predecessor performance of the VTF is superior. Van Tracker Fund Features The Company believes that among the numerous VTF features outlined below, several may be unique to this product. Not only can the VTF be shown to track the "real" hedge fund universe, it will report tracking error between itself and the larger Van Index. VTF strategies will be weighted to represent their weighting in the "real" universe. When strategy weightings change in the hedge fund universe (as represented by the Van Database and Index), the VTF strategy weightings will be changed to reflect changes in the universe. Thus, as the hedge fund universe changes its strategy mix to better cope with changing market conditions, so will the VTF. Based on the rigorous methodology used to pick constituent funds and tests involving more than 250,000 portfolios, the Company expects the VTF to produce alpha, to assist in overcoming fees. While the basic VTF product will use proportional weighting as described above, the structure of the VTF offers investors unusual flexibility in this as well as in several other respects: · investor choice among strategy-proportional weighting, dollar/capitalization weighting and equal weighting · the ability to "strategy-tilt" the VTF (over- and/or under-weight certain strategies) · the ability to custom-design a totally different fund of funds from among the 60-plus funds and 18 strategies and sub-strategies of the VTF. In summary, other characteristics of the VTF include: · a 15-year proxy predecessor portfolio performance history · transparency of methodology and constituent managers · disclosure of tracking error on an ongoing basis · rigorous mathematical methodology in selecting funds with human intervention limited primarily to a necessary due diligence overlay · weighting of strategies (in the strategy-proportional weighted version) - equivalent to the weighting of those strategies in the overall hedge fund universe · automatic re-weighting of strategies as the hedge fund universe changes its own proportional strategy weighting · access of the VTF to the broadest feasible selection of funds by minimizing restrictive rules that eliminate desirable funds · use of at least 60 funds, to improve strategy and risk diversification with that number expanding with dollars invested The 18 strategies and sub-strategies tracked include: Aggressive Growth, Distressed Securities, Emerging Markets, Income, Macro, Market Neutral Arbitrage, Merger Arbitrage, Fixed Income Arbitrage, Statistical Arbitrage, Convertible Arbitrage, Capital Structure Arbitrage, Market Neutral Securities Hedging, Market Timing, Opportunistic, Several Strategies, Short Selling, Special Situations and Value. Van Tracker Fund Methodology Construction of the VTF has involved VAN Research staff, academic assistance and input from the investment community including representatives of both the institutional not-for-profit and for-profit sectors. VAN is publishing a detailed description of VTF methodology in the very near future, outlining the various studies that have culminated in its actualization. This information will be available both in hard copy, upon request of qualified investors, and on a special Web site, to be announced. Distribution of the Van Tracker Fund The Company intends to build worldwide distribution of the VTF and looks forward to discussing it with, among others: · institutional and retail distributors including banks, brokerages, financial advisors and others · institutional investors · insurance companies · producers of index derivative products FOR: Van Hedge Fund Advisors International, Inc. Contact: George Van, Chairman 615-377-2949 www.hedgefund.com E-mail: vhfai@vanhedge.com About VAN VAN was founded in 1992. In the early 1990s, the Company performed the world's first large-scale research on hedge funds with methodological assistance from faculty of the Owen Graduate School of Management at Vanderbilt University. This research continues today. VAN maintains what it believes to be the largest hedge fund database in the world with extensive information on a total of approximately 5,300 hedge funds. Information on approximately 1,000 defunct funds is included in this database to mitigate survivor bias and for research purposes. The Company has been advising U.S. and international institutional investors, families and individuals worldwide on construction of hedge fund portfolios for nearly a decade. Using that cumulative experience, its research capabilities, academic support and rigorous qualitative and quantitative methodology, the Company believes it is uniquely positioned to construct and manage this product. In addition to its headquarters in Nashville, Tennessee, VAN also has representation in Europe, South America, Australia and Asia through various partnership arrangements. _______________________ This is not an offer or solicitation for the sale of any financial product but is provided simply for information. Van Hedge Fund Advisors International, Inc. and its affiliates are referred to herein as "VAN" and "the Company." VAN's database is used herein as being a representation of the overall hedge fund universe. Academic faculty have acted as consultants in an individual capacity. The Company's hedge fund index information is based on information received (and not audited or independently verified) from the hedge funds in an affiliate's databases and may not be representative of all hedge funds. Hedge fund returns are net of fees and performance allocations. The timing of the deduction of such fees and performance allocations may affect the reported performance. Different statistics may be based on different numbers of funds. Averages are not dollar-weighted. Past and test results are not necessarily indicative of future performance. _______________________________ 1 All references to hedge funds and the VAN Index above refer to individual hedge funds and exclude funds of funds. ------------------------------------------------------------ This information was brought to you by Waymaker http://www.waymaker.net The following files are available for download: http://www.waymaker.net/bitonline/2003/02/10/20030210BIT01130/wkr0001.doc http://www.waymaker.net/bitonline/2003/02/10/20030210BIT01130/wkr0002.pdf