Citigroup Sees Turn of the Year Hedge Fund Bonanza

Date: Friday, November 24, 2006
Author: Jeremy Gaunt, Reuters.UK

LONDON (Reuters) - Citigroup Private Bank has been telling its wealthy clients that now may be the best time to put their money into hedge funds.

Studying nearly 16 years of returns among the popular alternative investment, the wealth manager noted that December is the best month for hedge funds and on a consecutive basis December and January star.

The average monthly return for the asset class over the period has been 0.92 percent. December, however, has brought in around 1.5 percent.

January has average returns of more than 1.1 percent, slightly less than March.

"Average hedge fund returns during the turn of the year (December and January) are almost 1.5 times ... average returns during the rest of the year," the private bank's investment analysis and advice group said in a recent presentation.

Citigroup PB also found that different hedge fund strategies work better at different times of the year.

"The turn of the calendar appears a highly favorable time for most hedge fund strategies," the bank's investment analysis and advice group said in a recent presentation.

The research found that eight out of 12 specific hedge fund strategies had achieved their highest returns in December while three had done best in January. Two stood out together.

"Equity non hedge and macro strategies achieve over two times the average monthly returns in the months of December and January," it said.

A macro strategy generally involves taking leveraged bets on a top down basis in stocks, interest rates, foreign exchange and physical commodities.

An equity non hedge strategy allows for long stock positions without necessarily hedging the bet by making short sales of stocks and/or stock index options.

The only strategy that did not score its best with the December-January period was short selling, which does best in September.