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HedgeFund.net (HFN): Hedge Funds Rise as Equity Markets Fall in February
NEW YORK,
February hedge fund returns were supported by very strong moves in commodity prices virtually across the board, a bounce back in emerging markets and savvy short exposure from long/short equity managers. The aggregate benchmark of hedge fund performance, the HFN Hedge Fund Aggregate Average, outperformed the S&P 500 Total Return Index by 616 basis points (bps) in February and has increased +0.26% in 2008 while the S&P 500 TR is -9.06%. This is the largest outperformance by hedge funds over the S&P to begin a year since 2000 when the average hedge fund went on to return +17.52% and the S&P 500 was -10.14%.
There appears to be a growing divergence in hedge funds returns between those funds caught in the middle of the credit market's troubles and those benefiting from the environment created by attempts to solve the issues. Commodity focused managers are off to their best start in 10 years and are benefiting greatly from U.S. monetary policy which is more focused on liquidity than limiting inflation. The HFN CTA/Managed Futures Average was +8.95% in February and is +10.96% in 2008. In the last twelve months, the average CTA has returned +24.9%.
The relative decline in value of the USD and growing interest rate differentials between U.S. Treasuries and various sovereign rates has been a factor in macro funds being one of those groups able to take advantage of shifting global market dynamics. The HFN Macro Average was +3.41% in February and is +2.91% YTD. For macro funds, 2008 marks the highest beginning-of-year outperformance over broad hedge fund returns since 1997, a year in which the average macro fund went on the return +24.23%.
Both emerging markets and energy sector funds bounced back after large January losses to support aggregate hedge fund performance in February. The HFN Emerging Markets Average was +3.60% and the HFN Energy Sector Average was +2.65% in February. Neither, however, was able to fully recoup from losses in January and are -1.56% and -3.63%, respectively in 2008.
For the second straight month, long/short equity managers proved able to add protection during market declines. The HFN Long/Short Equity Average was +2.03% in February and despite the average L/S manager returning -2.52% YTD, the strategy has outperformed the S&P by 654 bps. Market neutral funds are doing a better job of remaining independent of overall market swings, but short biased funds are taking full advantage of the environment. The HFN Market Neutral Average was +1.40% in February and is +0.23% YTD while the HFN Short Bias Average was +4.43% in February and +9.24% YTD.
Not every hedge funds strategy was able to dodge bullets in February and there will likely be more poor performance figures reported as the month progresses. Initially it appears arbitrage strategies in fixed income markets were most negatively affected by credit market disruptions. The HFN Fixed Income Arbitrage Average was -0.41% in February while the HFN Convertible Arbitrage and Capital Structure Arbitrage Averages were -2.74% and -4.72%, respectively.
The main point to glean from hedge fund returns during the first two months of 2008 is that the universe of hedge funds is diverse and in almost any market environment there will be a number of funds able to produce outstanding returns. As market dynamics shift, so too will the strategies which benefit and thus far in 2008 it appears those making strong bets on commodity and interest rate differentials and either taking advantage of volatility or properly positioned with short exposure are in the best shape.
A full report on February performance will be available at www.hedgefund.net later in the month.
The table below is a summary of February 2008 returns for a selection of HFN Averages: Last 3 Last 12 HFN Aggregate Averages February* Months** Months** HFN Hedge Fund Aggregate Average 2.93% 0.95% 8.95% HFN Regional Averages*** HFN Asia Average 2.51% -2.88% 8.54% HFN Europe Average 2.16% -0.61% 4.04% HFN US Average 1.81% -0.12% 6.35% HFN Global Average 3.77% 2.35% 10.19% HFN Single Strategy Averages HFN Convertible Arbitrage Average -2.74% -3.79% -1.21% HFN CTA/Managed Futures Average 8.95% 13.13% 24.85% HFN Distressed Average -0.08% -2.83% -0.11% HFN Emerging Markets Average 3.60% 0.27% 17.02% HFN Energy Sector Average 2.65% -1.13% 10.17% HFN Event Driven Average 2.01% -1.04% 2.58% HFN Long/Short Equity Average 2.03% -2.08% 6.46% HFN Macro Average 3.41% 3.89% 14.06% HFN Market Neutral Equity Average 1.40% 0.82% 5.58% * Estimated results of funds reporting February 2008 performance as of March 10, 2008 ** Estimated results for all funds having reported performance as of March 10, 2008 *** Regional averages derive performance from returns of funds investing primarily in those regions. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS
HedgeFund.net (HFN), a division of Channel Capital Group Inc, is a leading source for hedge fund news and information. Investors who meet HedgeFund.net's accreditation standards are eligible for access to an online database of more than 8,000 hedge funds, funds-of-funds and CTA/managed futures products. HFN serves a rapidly growing user base of more than 33,000 accredited investors worldwide. Registered users include a wide range of institutional investors and high net worth individuals. For more information or to register, please go to www.HedgeFund.net.
HedgeFund.net Contact: Joel Schwab Managing Director Channel Capital Group Inc. t: (212) 381-8065 e: joel.schwab@hedgefund.net
SOURCE HedgeFund.net
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