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January 9, 2006
Hedge funds still outperforming
Hedge fund performance last year was less than stellar, but managers, in the aggregate, were still able to outperform the broad market averages. That's what they're paid for -- although those pay packages will leave investors with less.
The CSFB/Tremont Hedge Fund Index, a broad measure of hedge fund return, shows an estimated overall gain of 6.6% in 2005. That's better than the 3% return posted by the S&P 500 before dividends.
Another pan-strategy gauge, the MSCI Hedge Invest Index, showed a less-flattering 4.7% annual return. (Numbers vary among indices because each uses a different subset of funds and managers.)
Among strategies, funds exposed to global markets did better than those having a long exposure to the U.S. stock market. As a result, the two best-performing strategies were dedicated short-selling and emerging markets, said Oliver Schupp, president of CSFB/Tremont Index. Dedicated short-sellers, or funds where at least 80% of the positions are short, returned 17% last year. "Most managers focus on U.S. stocks, and with the U.S. market not having a great year, there were plenty of opportunities to profit on the short side," Schupp said.
Emerging-market managers also posted a 17% return, benefiting from the bull market in Asia and strong results in Eastern Europe and Latin America.
But while those two strategies did best, they are relatively small in terms of what they represent in the hedge fund universe: short-sellers make for less than 1% of the assets under management, and emerging markets 5%. The big strategies are long/short equity (28%), event-driven (23%) and global macro (12%), says Schupp.
So-called long/short managers, who take long and short stock positions, posted a 8.6% return, but the bulk of the returns came from those with an exposure to Japan (up 40%) and to Europe (up 20%), according to CSFB/Tremont.
Posted by su at January 9, 2006 10:58 AM