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Hedge Funds Post Best Performance Since February 2000

Date: Friday, June 12, 2009
Author: Tomoko Yamazaki, Bloomberg

Hedge funds returned an average 5.2 percent in May, the best performance in more than nine years, as they attracted more money and global markets rallied, Eurekahedge Pte said.

The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, has advanced 9.2 percent this year, according to a preliminary report by the research firm based on the 27 percent of funds that reported May performance. The industry recorded net inflows for the first time in 10 months in May, gaining $1.5 billion, while total assets rose by $5 billion, the report said.

“Numbers of this magnitude clearly won’t last, but I do think the industry will have a very good year,” said Peter Douglas, principal of GFIA Pte, a Singapore-based hedge-fund consulting firm. “What we like at the moment is equity long- shorts, and Asia is an equity story.” Long-short equity funds bet on rising and falling stock prices.

Hedge-fund managers are outperforming global benchmarks after posting the worst year on record in 2008. Eurekahedge’s global index slid 12 percent last year, the most since the Singapore-based firm began tracking data in 2000. The MSCI Asia Pacific Index rose for a third month in May, advancing 12 percent in its longest stretch of monthly gains since July 2007.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether asset prices will rise or fall.

Recovery Hopes

Signs that the global economy may be recovering have fueled the stock-market rally. Japan’s industrial output rose the most in 56 years in April, while India posted economic growth of 5.8 percent in the first quarter, beating economists’ estimates. In the U.S., the Conference Board said May 26 that its index of consumer confidence surged to 54.9, the most in six years.

Eurekahedge’s seven regional indexes all rose in May. Hedge funds investing in Asia were the best performers, jumping 9 percent, on the back of regional equity-market rallies, the firm said. An index measuring emerging-market hedge funds advanced a record 8.5 percent, the report said.

The Rab-Pi Asia Fund Ltd., run by Alain Barbezat and Caesar Luk at Rab Capital (Asia) Ltd., returned 2.9 percent in May, bringing its year-to-date advance to 5.9 percent, according to a letter to investors. The gains were driven by advances in Chinese and Hong Kong stocks.

The Riley Paterson Asian Opportunities Fund, a long-short equity fund, rose 8.6 percent last month. The fund’s assets have more than doubled this year to $45 million as of May 29.

Japan Managers

The Eurekahedge Japan Hedge Fund Index gained 4.2 percent in May. Myojo Japan Long Short Fund returned 1.4 percent in April in yen terms, bringing its year-to-date gain to 15 percent.

Sparx Japan Stocks Long Short Fund, also known as “Best Alpha” and run by Sparx Group Co., Asia’s biggest hedge-fund manager, returned 2.2 percent in May, according to the company’s Web site.

The Japan Macro Fund, managed by Singapore-based Asia Genesis Asset Management Pte, was up 0.61 percent last month, bringing its year-to-date return to 21.85 percent, according to the firm.

Hedge funds attracted $3.2 billion in May, based on the preliminary data, offsetting redemptions of $1.7 billion, according to Eurekahedge. The industry’s assets were about $1.3 trillion at the end of May, compared with a peak of $1.95 trillion in June 2008, the report showed.

All nine Eurekahedge measures tracking different hedge-fund strategies rose. Event-driven funds, investing in companies such as those involved in mergers and acquisitions, jumped 7.2 percent, making it the best performer, the report showed. The index tracking the long-short equity funds followed, climbing 6.7 percent. Funds investing in distressed debt gained 2.4 percent, the smallest gain among all strategies.

Eurekahedge plans to release a full report later this month.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net