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December 13, 2007
Hedge fund outperform leading equities
Hedge funds have posted strong returns this year, comfortably outperforming leading equity market indices in spite of widespread turmoil in global capital markets, according to figures to be released on Thursday.
The average hedge fund across all investment strategies returned 12.1 per cent over the year to November 30, according to figures from the Credit Suisse (NYSE:CSR)/Tremont hedge fund index, one of the most widely followed measures of hedge fund industry performance.
By the same date, the S&P 500 was up just 6.2 per cent and the MSCI World index, 8.6 per cent. Every hedge fund strategy covered by Credit Suisse/Tremont experienced positive performance in the first 11 months of the year. Even in November, when the US stock market had one of its worst months for a long time, the broad hedge fund index rose 2 per cent.
Emerging market funds have been the best performers, returning more than 20 per cent. Other strategies to have fared well include event-driven funds, that have taken advantage of regular bursts of M&A activity through the year, and multi-strategy funds, which have posted returns of more than 18 per cent, according to the data. The year has been characterised by unusually high levels of volatility that took their toll on certain hedge fund strategies at various times and on financial markets more generally throughout the year. But hedge funds, as a whole, appear to have weathered much of the storm.
The quantitative fund meltdown of August, prompted by abnormally high volatility and low liquidity, saw statistical arbitrage managers in particular post losses. Even so, seven out of 10 strategies ended the third quarter in positive territory.
Hedge funds have att-racted negative headlines at regular intervals over the past year, with several quant funds reporting hefty losses at the height of August's market turmoil.
Some hedge funds have reported losses more directly linked to the US subprime mortgage crisis and subsequent credit market conditions. Renaissance Technologies and Goldman Sachs were among the most prominent firms to report losses, although both have since seen a revival in fortunes.
One of the best performing hedge funds has been Paulson Capital, whose early bet on trouble in the subprime mortgage sector has paid off spectacularly. Paulson Credit Opportunities I fund gained 5.8 per cent in November, net of fees, leaving it up 587.5 per cent so far this year.
-FT.com-
Posted by su at December 13, 2007 12:04 PM