Key hedge fund investments make tawdry start to year

March 2005

Several hedge fund strategies produced negative returns in January, results that will rile investors who contributed large flows to these alternative investments in 2004.
The latest research from French business school Edhec has found that convertible arbitrage returned an average of -0.9 per cent for January, while global macro and long-short equity did little better, producing 0.38 and 0.53 per cent respectively.

Each strategy returned moderate but nonetheless positive numbers for the preceding month.
In 2004 a record $123bn (€94bn) flowed into hedge funds, compared with $72bn in 2003, according to Tass Research, which is owned by Tremont Capital Management, and the poor performers of the early part of this year were among the biggest beneficiaries.
Long-short equity received the largest slice of the assets ($33bn), followed by event driven strategies ($25.7bn) and global macro ($16.7bn).
Event driven funds at least returned positive figures, according to Tass, but are hardly shooting the lights out, with an average figure of 0.18 per cent.
Robert Schulman, co-chief executive of Tremont Capital Management, said poor performance was down to low volatility in the equity markets.
The best performing hedge fund strategy in January was short selling, which produced a 3.35 per cent average.
Neil Wilson, managing editor of data provider EuroHedge, said investors would not be put off by brief barren spells in the hedge fund sector.
He pointed out that in 2004 I Europe there was a drop off in flows into hedge funds in response to disappointing performance, but “the slowdown was probably not as marked as some had predicted, with almost $40bn of assets being added in the second half.”
He added that long-short equity remains the single biggest strategy in Europe, accounting for $60bn of assets. RM

Printer friendly version