Hedge Funds Withstand Turbulent February: Early Reports |
Date: Thursday, March 8, 2007
Author: Chidem Kurdas and Maggie Shea, HedgeWorld
NEW YORK (HedgeWorld.com)—Hedge funds that
reported their February performance to the MSCI and Greenwich databases
had positive returns as a group, despite the sharp correction in equity
markets late in the month.
The February return for the two indexes was similar, with the MSCI
Hedge Invest Index up 0.53% and the Greenwich Global Hedge Fund Index
up 0.58%. Year to date, MSCI gained 2.08% and Greenwich 1.78%. MSCI
turned in a 1.55% performance in January
The MSCI Index lost 0.83% on Feb. 27, the biggest single-day
loss for the month. The MSCI index's plunge occurred not only on
February's last day for recording actual performance results for the
month, but also on the day Chinese equity markets saw their biggest
price drop in 10 years, which spurred dramatic global stock market
losses Previous HedgeWorld Story.
In contrast to hedge funds, equity indexes in general are down—the
S&P 500 has lost 1.6% year to date. Equity long/short is the
largest strategy segment among hedge funds, and overall industry
returns correlate highly with the stock market. But some hedge funds
were expecting the recent correction and prepared for it Previous HedgeWorld Story.
Certain strategies performed particularly well despite the equity
downturn. MSCI's event-driven index is up 3.2% for February and about
5.3% for the year. The long-bias index has made 2.46% year to date and
was the largest positive contributor to the performance of the MSCI
index, in part because it has a larger weight—25%—than other
strategies.
"Hedge funds' February gain demonstrates their diversification benefits
for investors seeking reduced systemic risk in their portfolios," said
Greenwich general manager Ben Rossman, in a statement. He said roughly
70% of hedge funds reporting thus far are positive for February.
However, some hedge funds have not yet reported to index
providers (and a sizable group does not report to any database). Data
for a larger sample of funds is expected later in March.
While hedge funds do not so far show much damage from the equity
stumble, trend-following futures funds were hit hard by choppiness in
commodity markets. The MSCI systematic trading index lost 2.39% in
February.
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