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Pooled funds of hedge funds return -4.0 pct in Q1 - BNY Mellon


Date: Thursday, June 5, 2008
Author: Claire Milhench, Thomson Rueters.com

This is the third consecutive quarter that pooled funds of hedge funds have failed to achieve a quarterly positive return, the bank said.

LONDON (Thomson IM) - Pooled funds of hedge funds made a 4.0 percent loss in the first quarter of 2008, their lowest return since BNY Mellon Asset Servicing began measuring their performance in 2003, according to new data published by the bank.

This is the third consecutive quarter that pooled funds of hedge funds have failed to achieve a quarterly positive return, the bank said. Its fund of hedge funds universe currently covers 19 separate funds with over 4.9 billion pounds in assets.

Pooled fund of hedge funds managers still managed to outperform UK and overseas equities pooled funds, which returned -9.7 percent and -9.5 percent respectively. But property did slightly better, managing -3.5 percent in the first quarter, whilst UK bonds delivered -1.1 percent and cash 1.3 percent.

Commenting on the results, Alan Wilcock, performance and risk analytics manager at BNY Mellon Asset Servicing, said: 'Along with one of the worst starts ever to a year for the equity markets, pooled funds of hedge funds also suffered from negative returns in January and March, producing the lowest quarterly return we have seen.'

Stronger results in earlier periods meant that funds of hedge funds did make some small gains over a one year period with a median return of 1.7 percent. Pooled fund of hedge funds managers also outperformed key sectors over this period, namely UK and overseas equities funds which returned -8.8 percent and -1.9 percent respectively. Over three and five years the median pooled fund of hedge funds returned 7.5 percent per annum and 8.2 percent per annum respectively.

However, over the three years to 31 March 2008, pooled funds of hedge funds were outperformed by both UK (8.8 percent per annum) and overseas equities (10.6 percent per annum) pooled funds.

Yet the volatility of returns over this period, as measured by the median standard deviation, was significantly lower for fund of hedge fund managers, according to BNY Mellon. The standard deviation for pooled funds of hedge funds was 5.3 percent per annum, compared with 10.1 percent per annum and 10.9 percent per annum for UK and overseas equities funds.

Over this period, pooled fund of hedge funds managers achieved an outperformance of 4.1 percent against UK bond pooled fund managers, with broadly similar levels of risk; the median standard deviation of these funds was 4.6 percent per annum.

BNY Mellon said that at 31 March 2008, the average fund of hedge funds in its universe held 48.4 percent of its assets in directional strategies, 13.1 percent in event driven strategies, 17.2 percent in non-directional strategies and 21.4 percent in other (unspecified) strategies and cash.

By Claire Milhench: +44 (0) 20 7422 4808; claire.milhench@thomsonreuters.com; www.thomsonimnews.com