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Saturday, September 25, 2021

Hedge Funds Dramatically Outperform Equity Markets Despite Losses


Date: Thursday, October 9, 2008
Author: Greenwich Alternative Investments, LLC

Hedge funds measured by both the Greenwich Global Hedge Fund Index ("GGHFI") and the Greenwich Composite Investable Index ("GI2") significantly outperformed equity indices despite posting their greatest losses since August 1998 during September. The GGHFI and GI2 posted declines of -4.85% and -5.87% on the month, respectively, compared to global equity returns in the S&P 500 Total Return (-8.91%), MSCI World Equity (-12.08%), and FTSE 100 (-13.02%) equity indices. Year-to-date, the GGHFI and the GI2 shed -8.85% and -8.82%, respectively, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have lost -19.29%, -25.59%, and -24.07%, correspondingly. 24% of constituent funds in the GGHFI ended the month with gains.
"It was a perfect storm for both credit/equity markets and hedge funds in September. The already deflated values of financial firms provided the perfect trap for value investors while government intervention limited the ability of hedge funds to effectively mitigate their risk. Simultaneously, the continued freezing of credit markets combined with investor redemptions forced fixed-income funds to liquidate or otherwise mark down assets at depressed prices. The results of the market turmoil and unpredictable regulatory environment are evident in their returns this month," notes Thomas Whelan, CEO.
Long/Short Equity managers fared better than both US and foreign equity markets during the month, but still were subject to unpredictable market movements, losing -6.69%. Both Growth and Value funds struggled to find profitable trades, returning -8.16% and -7.05%, respectively. Short Selling managers by contrast enjoyed their most profitable month this year, advancing +9.27% on average. Year-to-date, Short Selling funds have gained 17% and remain the best performing subsector of hedge fund strategies.
Market Neutral funds were not immune to market forces during September, as they felt the effects of dysfunctional credit markets, declining -4.49%.
Despite the marked weakness in hedge funds in September, not all hedge fund strategy groups moved lower for the month. Directional Trading funds advanced by +0.51% on average, led by Futures managers who capitalized on declining commodity values. Macro managers did not fare as well, losing -3.62% on the month.
Specialty Strategy managers were the weakest performing strategy group for the month of September, with funds losing -7.33% on average. Emerging Markets funds were once again the main reason behind the losses as these managers shed nearly 10% during the month.
The GGHFI is one of the oldest benchmarks of the hedge fund universe. Final index results for September will be available mid-October, once additional funds have submitted returns. The GI2, comprising 46 constituent funds, adds investability, active management, and liquidity to the diversification and performance benefits of the broad Greenwich Global Hedge Fund Index. It references actual hedge fund vehicles as opposed to separately managed accounts or other methods used in an attempt to replicate the returns of hedge fund vehicles. The Investable Index is reported semi-monthly net of a 0.02% per period index calculation fee. Past performance and indices construction rules for all Greenwich Hedge Fund Indices may be viewed at www.greenwichai.com.
About Greenwich Alternative Investments
Greenwich Alternative Investments, LLC (and its affiliates) manages one of the world's largest hedge fund databases and is among the oldest providers of hedge fund indices, asset management services, and research to institutional investors worldwide.
SOURCE: Greenwich Alternative Investments, LLC