Hedge funds buoyed by stock markets in August

Date: Friday, September 14, 2012
Author: Laurence Fletcher, Reuters

Hedge funds racked up further gains in August, helped by rising stock markets, low volatility and the relative absence of major political shocks in the euro zone, whose debt crisis has proved so hard to handle for managers in recent years.

The SS&C GlobeOp Hedge Fund Performance Index, which tracks the performance of the majority of hedge fund services provider GlobeOp's $187 billion in assets administered, rose 0.83 percent in August, taking returns so far this year to 6.76 percent, the firm said in a statement.

Returns are shown gross, meaning they do not take account of hedge fund operators' lucrative fees, typically a 2 percent annual management charge and 20 percent of performance.

Funds were helped by gains in markets - the S&P 500, including dividends, gained 2.25 percent - while the month also featured a drop in volatility, as many investors took off bets ahead of major announcements from the European Central Bank and U.S. Federal Reserve in September.

The gains mean that hedge funds have made money in every month so far this calendar year on a gross basis, according to SS&C GlobeOp, although including the effects of fees, funds posted a marginal 0.01 percent drop in June.

According to Hedge Fund Research (HFR), a rival index provider, the average hedge fund gained 0.76 percent in August, taking gains this year to 3.49 percent.

Funds are this year trying to avoid another calendar year of losses, which would mean they had lost money in three out of the past five years, according to HFR data.

SS&C GlobeOp says its index avoids so-called "survivorship bias" as funds cannot choose whether or not they report performance. The index is asset-weighted, meaning the performance of bigger funds counts for more than smaller ones.