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News : International Last Updated: Apr 24, 2009 - 5:31:05 PM


Hedge funds performance index fell for fifth straight month in November
By Finfacts Team
Dec 9, 2008 - 7:11:10 AM

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Hedge funds as measured by the Greenwich Global Hedge Fund Index (GGHFI) declined for the fifth straight month, but only fractionally when compared with global equity returns during the month of November. Preliminary returns from managers reporting to the GGHFI show an average decline of -1.13% on the month, while the Greenwich Composite Investable Hedge Fund Index (GI2) declined -2.05%. This compares to global equity returns in the S&P 500 Total Return (-7.18%), MSCI World Equity (-6.72%), and FTSE 100 (-2.04%) equity indices.

Year-to-date, the GGHFI and the GI2 have shed -16.11% and -18.3%, respectively, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have lost -37.66%, -43.81%, and -33.58%, correspondingly. 44% of constituent funds in the GGHFI ended the month with gains.

“Although hedge funds declined during the month of November, they did a better job on average of protecting investor capital than in prior months. While we are seeing further dislocations in funds that trade in less liquid securities, the majority of hedge fund strategy groups seem to have stabilized.” said Margaret Gilbert, Managing Director, Greenwich Alternative Investments.

Long/Short Equity managers declined by -2.55% in November on average. Although these results are less than half of the losses experienced in US equity markets during the month, Long/Short managers were the weakest performing strategy group in November. Value funds performed slightly better than Growth oriented managers, but both lost -2.87%, and -3.38%, respectively. Short Selling managers continued to outperform other hedge fund strategy groups, gaining 5.54%. Year-to-date, Short Selling funds have gained more than 32% and remain the best performing subsector of hedge fund strategies.

Market Neutral funds improved their results in November but still fell on average by -1.27%. Convertible Arbitrage and Distressed managers continued to experience difficult trading environments and increased redemptions, posting the weakest returns among Market Neutral managers, declining by -5.61% and -5.02, respectively. Statistical and Other Arbitrage managers advanced on the month, returning 1.63% and 0.25%, respectively. Merger Arbitrage funds enjoyed a positive month, gaining 1.50% and holding on to a loss of only -3.46% on average for the year.

For the third month in a row, Directional Trading managers moved higher (+2.34%), driven once again by strong results from Futures managers. Directional managers year-to-date through November are now up more than 8% and are the best performing strategy group among hedge funds. Macro managers also advanced in November, with funds gaining 0.91% on average.

Specialty Strategy funds declined marginally in November, with managers losing -2.03%. Emerging Market funds were once again the worst performers among this group, declining by -2.72%.

 

The Wall Sreet Journal reported on Monday that continued deterioration of the performance of hedge funds heightens concerns that they will be forced to sell more of their good assets in order to satisfy the backlog of redemptions. That selling could put added stress on the markets, as the global hedge-fund industry manages more than $1.5 trillion.

Mitch Kaye, a hedge-fund consultant, said nearly every fund he has seen has run into some form of trouble, whether they are considering halting redemptions or slowing them. Mr. Kaye is a managing director of Navigant Capital Advisors, a unit of consultancy firm Navigant Consulting Inc. that provides consulting for financial institutions under duress, including hedge funds.

Among major funds, Fortress' $7.2 billion Drawbridge Global Macro Fund, which has seen a curb on investor redemptions, lost 2.3% in November and is now down 23% for the year, according to investors. The publicly traded alternative-asset manager's stock recently traded down 10% at $1.70 and is down nearly 90% for the year.

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