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March 2, 2007
February might yet be good month for hedge funds
Ironically, this week's sharp market declines may have been good for hedge funds.
While no final performance numbers for February have been released, consultants and investors who track hedge fund returns said the loosely regulated portfolios would likely post small gains. Mutual funds, however, will likely nurse losses.
Preliminary data from the Barclay Group show the average hedge fund slipped 0.27 percent last month, said Sol Waksman, the group's president. But with data from only about 100 funds recorded, Waksman expects the overall number to be positive soon.
"People were definitely not universally affected," said Andrew Fisch, a portfolio manager for funds of funds at SSARIS Advisors after polling dozens of managers.
Certain arbitrage strategies that bet stocks would fall but bonds would rise did well as equities tumbled and investors preferred the safety of bonds.
Similarly, some global macro managers were said to have made money on having bet the dollar would decline and a few players who put on contrarian bets that equities would fall, also fared well, the industry trackers said.
HFR's Heinz said merger arbitrage funds, on average, were up 4 percent last month, while equity market neutral funds were up about 3 percent.
Even funds that played in the distressed debt markets did not lose as much money as some investors thought they would, several people said, noting they expect credit spreads to widen gradually and see no systemic risk in the market.
Indeed for some hedge funds, Tuesday's decline was a blessing because it finally delivered a chance for these funds, which use trading techniques such as selling stocks short, to differentiate themselves from mutual fund.
"When the market is going up, hedge funds can't outperform, but when you have corrections like this one, that is where the rubber hits the road and hedge fund can do better than mutual funds," Hennessee's Gradante said.
-Reuters-
Posted by su at March 2, 2007 4:45 PM