Aust hedge funds slip into the red

Date: Monday, March 30, 2009
Author: Business Spectator

Australian hedge funds slipped into the red in February, but their declines were less than that of major sharemarket indices in Australia and the United States, new data shows.

Research group Australian Fund Monitors said the domestic hedge fund industry returned negative 1.6 per cent in February.

The fall last month erased January's 0.4 per cent gain, and the industry's returns were down by 1.04 per cent for the calendar year to the end of March.

The returns are based on 92 per cent of local hedge funds.

But the declines were less than that of the Australian sharemarket's benchmark S&P/ASX200, which fell 4.57 per cent in February and was down 9.23 per cent in the first two months of 2009.

The broader Standard & Poor's 500 index in the US lost 10.65 per cent in February, taking the year to date losses to a negative 18.18 per cent.

Australian Fund Monitors said that of the 200 or so funds listed in its index of hedge funds, 48 per cent produced a positive return in the first two months of 2009, with 91 per cent of all funds outperforming the benchmark S&P/ASX200.

Equity-based hedge funds posted the largest decline in February, down 2.36 per cent.

Australian Fund Monitors chief executive Chris Gosselin said that hedge funds were less risky than equities in times of volatility and adversity.

"The results, whilst not universally positive, again showed that in times of adversity hedge funds, far from being the speculative vehicles that they are frequently portrayed as, provided diversity and significantly better risk profiles than equities alone," Mr Gosselin said.

Among the top-performing funds, Select Gold, was the strongest performer in February, posting a positive return of 8.56 per cent.

Select Gold aims to achieve capital growth over the long-term by investing in the equities of gold and precious metal companies.

Bennelong Securities Long Short Equity Fund came in second with a positive 7.88 per cent return for February.

Bennelong Securities has an equity market neutral strategy, investing equal proportions long and short. The strategy is an attempt to have opposing market risks cancel each other out to achieve absolute returns.

Australian Fund Monitors said equity market neutral continues to be the best performing equity-based strategy.

It said equity market neutral was the only equity-based strategy to have produced a positive return in the 2009 year to date, continuing the positive performance from 2008.