Hedge funds recover from slow start to 2005, says S&P

Date: Wednesday, March 9, 2005
Author: By James Langton- IE-

Hedge fund performance bounced back in February.after getting off to a slow start in 2005, says Standard & Poor’s.
Hedge fund, as measured by the S&P Hedge Fund Index, finished the month of February up 0.83% to produce a positive year- to-date return of 0.36% for the index, S&P said in a release. Within the headline index, various hedge strategies also bounced back from a sluggish January. The S&P Directional/Tactical and S&P Event-Driven Indices, returned 0.67% and 1.53% respectively for the month. The S&P Arbitrage Index also ended February on a positive note, returning 0.29% during the month.
Within the S&P Directional/Tactical Index, equity managers were the largest gainers in February, it reported. The S&P Equity Long/Short Index moved up 1.80% during the month. “Strong stock selection and a trend toward more concentrated holdings benefited many managers as equity markets continued to rally on improved balance sheets and earnings,” S&P said. The S&P Managed Futures Index, comprised of 14 predominantly medium- to long-term trend followers, ended the month in slightly negative territory, down 0.14%.
Gains in energy and index futures were offset by losses in long grains and government bond positions, it said. “The month of February witnessed a continued recovery in the equity market neutral strategy, particularly in Europe,” said Charles Davidson, senior hedge fund specialist at Standard & Poor’s. “Many convertible arbitrage managers continue to find difficulties in this low volatility environment resulting in small increases in leverage. Results in fixed income were mixed with yield curve traders outperforming those in the mortgage-backed space.”
“Merger Arbitrage managers are finally starting to see opportunities in what has become an increasingly favorable environment,” adds Davidson. “The positive tone in M&A activity is reflected in the upward price moves on acquirers’ stocks after announcements.”