RBC’s Alternative Assets Group today announced the launch of the RBC Hedge 250 Index, a broadly diversified and representative investable hedge fund index.

RBC said the 250 individual funds in the new index capture approximately 20% of total hedge fund assets under management.

“We have capitalized on RBC’s significant experience and relationships in the industry to create the RBC Hedge 250 Index which we believe to be the most representative investable hedge fund index in the market,” said Winson Ho, co-head of the Alternative Assets Group and co-creator of the index, in a release.

The new index employs a screening process to identify component funds from a universe of 4,700 funds. The index follows a set of rules to direct and adjust the composition of the index over time. Unlike other investable hedge fund indices, the new index references actual hedge funds and not separately-managed accounts. This makes it possible to include a wide range of funds and managers, and not just those that are the most liquid and accessible.

Ho continued, “We believe our proprietary process results in an index which is more representative than other investable indices, and as a result, will more accurately reflect the industry’s returns. So far, this conclusion has been firmly supported by its performance. Since its inception in July 2005, the RBC Hedge 250 Index has had a net return of approximately 9%. In comparison, over the same period, the non-investable indices have averaged 10% while the other investable indices have averaged 5.5%, according to information reported by the sponsors of those indices.”

The index categorizes hedge funds across nine strategies in four sectors.

The initial weighting of the RBC Hedge 250 Index is based upon a determination of each strategy’s representation in the total hedge fund universe. The number of funds representing each strategy is proportional to the weighting of that strategy, and within each strategy, the weighting of each fund will initially be equal.

The RBC anticipates that a suite of products linked to the index will be available on a private placement basis to qualified purchasers.