Hedge Funds Resilient Through February: CS/Tremont

Date: Wednesday, March 19, 2008
Author: Jacob Bunge, Financial Correspondent, Black Enterprise.com

NEW YORK (HedgeWorld.com) - Despite tumbling stocks and dour economic news in the United States and abroad, most hedge fund strategies made headway in February, according to the Credit Suisse/ Tremont Hedge Fund Index. As a whole the index climbed 1.61% over the month, with big gains seen among managed futures and global macro strategies.

February's gain for the broad index followed a decline of 1.48% in January. Year-to-date through the end of February the index was up approximately 0.1%.

"Although February showed market improvement from January, global markets continued to fall amidst rising inflationary pressures and slowing economic growth," said Oliver Schupp, president of Credit Suisse Index Co. Inc., in a statement accompanying the index figures. "Although the federal funds rate did not change, economic indicators suggested that continued turbulence in the market remains."

Nowhere was this more evident than equities markets. After a rocky month, the Standard & Poor's 500 DRI Index was down 3.25% for February, while the Dow Jones World Index managed a gain of 0.15%. Year-to-date those indexes are down 9.05% and 7.81%, respectively.

Long/short equity hedge funds rose above the turmoil, however, posting a 2.06% gain in a month that has generally seen such funds prove their worth as guardians of investors' capital in adverse market conditions. The Hennessee Hedge Fund Index had long/short equity up 0.93% in February, while long/short funds tracked by the Dow Jones Hedge Fund Indexes were up 1.49%. But long/short managers have some way to go before they're able to erase January's losses from their books - long/short equity funds in the CS/Tremont index remained down 2.08% year-to-date.

Futures managers increased the blistering pace they set in January, gaining 6.61% for the month of February and raising their year-to-date result to 11.01%. The continuing travails of the dollar had a lot to do with this, as energy, agriculture and precious metals shot to new highs. Global macro managers hitched their wagons to this trend as well and returned 4.11% following a 4.44% gain in January.

Emerging markets funds, returning 1.78% in February, improved on January's performance, when they lost 2.67%. Equity market neutral funds improved as well, up 1.07% in February compared to a gain of 0.69% the month before. Event-driven managers, down 2.44% in January, gained 0.85% for February.

Four of the 10 strategies tracked by CS/Tremont ended last month in the red. Multi-strategy funds declined 0.27% - not good, but better than January, when they were down 1.81%. Fixed-income funds, tripped up by uncertainty in bond markets, were off 0.66%, and convertible arbitrage funds sank 1.29%. Dedicated short bias managers, the heroes of January after pulling in a 5.68% gain while other strategies stumbled, couldn't make it happen again and had lost 0.89% when February came to a close.

The Credit Suisse/Tremont AllHedge Index, which contains 119 funds weighted according to the sector weights of the broad CS/ Tremont Index, was up 0.87% for February after declining 1.85% the month before. Here managed futures funds combined for a 5.35% gain, while convertible arbitrage had the worst performance, down 3.11%. The Credit Suisse/Tremont Blue Chip Index, which incorporates 10 funds from each of the 10 strategies tracked by CS/Tremont, gained 0.99%.

As of Feb. 29, the CS/Tremont Hedge Fund Index tracked 487 funds. Funds no longer reporting included Medallion Fund LP, Imperium Master Fund LP, JWH Global Strategies Ltd. (Strategic Allocation Program), ACM High Grade Strategy, New Star UK Hedge Fund Ltd., Green Coast, SGAM A.I. Global Equity Systematic Fund, Optima The Cuttyhunk Fund Ltd., Afton Capital Management, Hasenbichler Commodities AG, BlueCrest Equity Master Fund Ltd., Stadia Consumer Master Fund Ltd. and Sagamore Hill Hub Fund Ltd. Since inception in January 1994, the index has returned 334.26%.