One interesting development in hedge funds is the appeal of hedge fund vehicles pegged to an index. Called investable hedge fund indices, these vehicles resemble a fund of funds, but instead just track a hedge fund index. A fund of funds manager selects a pool of hedge funds using his own research. Investable hedge fund indices already represent several billion dollars of investment -- a drop of water in the $1 trillion hedge fund universe, but it's growing. Lehman Brothers ( LEH) is readying its Lehman Brothers/HFN Global Hedge Fund Index for launch in the first quarter. Subindices tracking specific hedge fund strategies will later follow. The investment bank known for its bond benchmarks partnered in the index with HedgeFund.net, a hedge fund database provider tracking more than 5,000 funds. Most of the existing investable hedge funds are a venture between a fund manager and an index or database provider. Hedge fund investors, including pensions, love the indices, much the way that mutual fund investors love index funds and ETFs. "It should pan out the same way," says Donald Cacciapaglia, chairman and CEO of Channel Capital Group, the company that produces HedgeFund.net. Understanding why is easy. The indices don't charge a 20% management fee like their hedge fund counterparts, and investors don't need to put in $1 million as a minimum investment. In fact, some of the indices, such as the RydexFund, which tracks the S&P Hedge Fund Index, only require a $25,000 investment. The Lehman Brothers Index is likely to follow that route, Cacciapaglia says. Fund of funds managers who spend their time and talent tracking the best managers for their clients don't really appreciate the indices. They tend to believe that only mediocre managers enter the index platforms. What remains to be seen is whether investors will share their point of view.