EUROPE – Barclays Capital and Hedge Fund Research are targeting pension funds and insurers with a new collateralised fund obligation product that they say gives exposure to the hedge fund market.

Barclays and HFR said they have teamed up to launch a collateralised fund obligation “for institutional investors seeking exposure to the hedge fund market”.

The CFO, issued by Barclays, is backed by the HFRX Global Tracker Fund and will enable investors to purchase exposure to the index in the form of an investment grade rated bond. Financial terms of the tie-up were not disclosed.

“The product will appeal to investors such as pension funds and insurance companies who are looking for effective asset liability matching relying on the attractive risk/return profiles of the hedge fund of funds markets and the capital efficiency of investment grade rated bond investments,” said Christian Stoiber, head of institutional funds derivatives marketing at Barclays Capital.

The bond “addresses the concerns of many investors regarding hedge fund investing”, the companies said. Barclays will offer two types of bonds, both euro denominated with a 10-year tenor, a protected fixed rate coupon and redemption value rated.

“This exciting new product further increases the range of investment products available based on the HFRX Index which has quickly established itself as the tracker of choice for institutional investors and asset managers throughout Europe,” said John Godden, managing director of HFR in Europe.

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