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Hedge funds in the black for 6th straight month


Date: Thursday, September 10, 2009
Author: Christine Williamson, Pionline.com

Hedge funds notched another month — their sixth consecutive — of positive performance in August.

Still, none of the major hedge fund indexes bested the 3.61% return of the S&P 500 index or the 3.63% return of the MSCI World index that month. All topped the 1.04% return of the Barclays Capital Aggregate Bond index.

Leading the performance pack in the last full month of summer was the Barclay Hedge Fund index at 2.24%, followed by the Hennessee Hedge Fund index, 1.85%; the Credit Suisse/Tremont Hedge Fund index, 1.68%; HFRI Fund Weighted Composite index, 1.65%; and the Eurekahedge Fund index, 1.13%. Hedge funds of funds fared worse: The HFRI Fund of Funds Composite index returned 0.97% in August and the Eurekahedge Fund of Funds index was up 1.08%.

As of the end of August, “hedge funds continued to lag the surging equity markets, as we would expect given their short positions and hedges,” wrote E. Lee Hennessee, managing principal, in a news release accompanying the researcher's hedge fund index returns. “Managers have opened up their exposures to benefit from the market rally. However, given the uncertainty around the economy, most managers are looking to generate gains due to stock selection, rather than beta exposure, as there is potential for a correction,” Ms. Hennessee continued.

The 23.31% return year-to-date through Aug. 31 of the MSCI World index proved impossible to beat and the S&P 500 index's 14.98% return for the period was hard for hedge fund indexes to best. However, both the Hennessee Hedge Fund index, at 17.3%, and the Barclay Hedge Fund index, at 16.61%, topped the domestic index for the period. Trailing the S&P 500 for the first eight months of the year were the HFRI Fund Weighted Composite index, 14.10%; the Eurekahedge Fund index, 13.10%; and the Credit Suisse/Tremont Hedge fund index, 11.74%. Returns of the major hedge funds-of-funds indexes lagged the equity indexes by hundreds of basis points with the HFRI Fund of Funds Composite index returning 7.87% year-to-date Aug. 31 and the Eurekahedge Fund of Funds index at 6.71%. All major hedge fund and funds-of-funds indexes beat the 4.62% return of the Barclays Capital Aggregate Bond index for the eight months ended Aug. 31.

Hedge funds' strong performance so far this year bodes well for an industry comeback, said Hedge Fund Research in a news release accompanying its index returns. “The overall hedge fund industry is currently on pace for the best year since 31.3% in 1999; this following the worst calendar year for hedge fund performance in 2008, a year in which hedge funds lost 19.03% on average,” wrote HFR researchers.

In addition to performance, Eurekahedge reported that net inflows into hedge funds totaled $4.5 billion in August, and that while 300 new funds were launched, 400 funds closed in the month.