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Hedge funds, as measured by the Greenwich Global Hedge Fund Index (“GGHFI”), gained across all major strategies in April. The GGHFI gained 1.69% compared to global equity returns in the S&P 500 Total Return +2.96%, MSCI World Equity +4.02%, and FTSE 100 +2.73% equity indices. 78% of constituent funds in the GGHFI ended the month with gains.
“Hedge funds continued to move higher in April driven by strength in equities and commodities,” notes Clint Binkley, Senior Vice President. “Nearly all hedge fund strategies are at new highs for the year and continue to be successful in a market dominated by headline risk and uncertainty.”
Hedge Fund Strategy Highlights
• Managed Futures funds gain 3.66% on strength in commodities
• Long-Short Equity managers advance over 1%, led by Growth funds
• Arbitrage Strategies lag other major sectors; still gain 29 bps
• Event-Driven and Long-Short Equity funds lead hedge funds on year-to-date basis
• Developed Market funds outpace Emerging Market managers by 60 bps due to strength in North American markets
The GGHFI is one of the oldest benchmarks of the hedge fund universe. Final Strategy and Regional index results for April will be available in early June, once additional funds have submitted returns. Past performance and indices construction rules for all Greenwich Hedge Fund Indices may be viewed at www.greenwichai.com.
About Greenwich Alternative Investments
Greenwich Alternative Investments, LLC (and its affiliates) is a leading alternative investment firm providing hedge fund indices, industry research, and index-linked products and services to institutional investors worldwide.
Wednesday, May 11, 2011
Tuesday, May 10, 2011
HFN Industry Overview: March 2011
Click here to read the full report.
On April 25, 2011 with 3,292 hedge fund products reporting, the HFN Hedge Fund Aggregate Index was +0.12% in March and +1.41% YTD 2011 while the S&P 500 Total Return Index (S&P) was +0.04% during the month and +5.92% YTD.
Hedge Fund Industry March Highlights:
•Total industry assets rose an estimated 0.63% to $2.552 trillion in March. Net investor allocations accounted for the majority of the asset increase and performance increased assets only slightly.
•Volatility spiked in March due to several major events and in this environment, fixed income strategies produced better average returns than equities with commodity strategies showing mixed results.
•Mortgage focused funds continued to perform well and were the best performing strategy in Q1 2011 followed by funds focused on the healthcare and energy sectors.
Monthly Asset Flow Estimates
•Total estimated hedge fund assets at the end of March 2011 were $2.552 trillion, an increase of 0.63%, or $15.95 billion from February.
•Performance accounted for an increase of $1.05 billion and investors accounted for a net inflow of $14.90 billion.
•The core rate of growth (% asset change due to investor allocations/redemptions) was 0.59%, a decline from February, but above the last twelve month average.
•Total hedge fund AUM is now 15% below the all-time high set in Q2 2008.
Net investor flow information continues to indicate strong interest investing directly into hedge funds. March inflows showed the ninth straight month of net allocations. The core rate of growth for Q1 2011 of 1.82% was the largest since allocations increased AUM 2.02% in Q4 2009.
Sub-Sector Specific Flows
•At the time of writing, investor flows for funds investing in Japan were positive for March; more likely the result of strong performance prior to the disaster. HFN will monitor Japan fund flow estimates in future monthly reports.
•Allocations to commodity strategies slowed in March, but were still positive. Mortgage strategies had the highest rate of allocations by product focus during the month and in Q1.
•Funds focusing on European markets experienced net investor redemptions in March while funds investing in Latin America had the highest rate of allocations.
•Market neutral and credit strategies had the highest rates of allocations in March. Distressed funds had their third straight month of net allocations and statistical arbitrage strategies continued a trend of redemptions in March.
Performance Review
Fixed Income (FI) Strategies
•The average return of all fixed income focused strategies was +0.48% in March and +2.39% year-to-date.
•Mortgage funds performed best in March, +1.25%, and distressed funds continued to post positive returns, +0.26%.
•Fixed income fund assets rose 1.82% in March to an estimated $675.3 billion. Investors added net $10.9 billion during the month.
Equity (EQ) Strategies
•The average return of all equity focused strategies was +0.27% in March and +1.62% YTD.
•Funds investing in emerging market equities had the best returns, +1.68%, followed by those investing in real estate related equity markets, particularly in emerging countries.
•Equity fund assets rose an estimated 1.15% to $836.8 billion in March. Investors allocated a net $3.98 billion during the month; a decline from February, but above the trailing six month average.
Commodity and Foreign Exchange (FX) Related Strategies
•Broad natural resource commodity strategies were -0.93% in March and +0.41% YTD.
•Funds investing in oil and energy markets performed well, +1.39% and metals sector funds returned an average of +0.44%. Average results were hurt most by quantitative focused trend following strategies.
•FX funds were +0.14% in March and -1.09% in Q1 2011. Agriculture commodity strategies performed better than average, +2.37% during the volatile month.
Summary Analysis
Investor interest in hedge funds was again high in March resulting in a very strong Q1 for industry growth. However, outside of the mortgage and energy sector, no other fund classification has a majority of its constituents outperforming equity markets in 2011. About 15% of the industry is currently beating the S&P.
On April 25, 2011 with 3,292 hedge fund products reporting, the HFN Hedge Fund Aggregate Index was +0.12% in March and +1.41% YTD 2011 while the S&P 500 Total Return Index (S&P) was +0.04% during the month and +5.92% YTD.
Hedge Fund Industry March Highlights:
•Total industry assets rose an estimated 0.63% to $2.552 trillion in March. Net investor allocations accounted for the majority of the asset increase and performance increased assets only slightly.
•Volatility spiked in March due to several major events and in this environment, fixed income strategies produced better average returns than equities with commodity strategies showing mixed results.
•Mortgage focused funds continued to perform well and were the best performing strategy in Q1 2011 followed by funds focused on the healthcare and energy sectors.
Monthly Asset Flow Estimates
•Total estimated hedge fund assets at the end of March 2011 were $2.552 trillion, an increase of 0.63%, or $15.95 billion from February.
•Performance accounted for an increase of $1.05 billion and investors accounted for a net inflow of $14.90 billion.
•The core rate of growth (% asset change due to investor allocations/redemptions) was 0.59%, a decline from February, but above the last twelve month average.
•Total hedge fund AUM is now 15% below the all-time high set in Q2 2008.
Net investor flow information continues to indicate strong interest investing directly into hedge funds. March inflows showed the ninth straight month of net allocations. The core rate of growth for Q1 2011 of 1.82% was the largest since allocations increased AUM 2.02% in Q4 2009.
Sub-Sector Specific Flows
•At the time of writing, investor flows for funds investing in Japan were positive for March; more likely the result of strong performance prior to the disaster. HFN will monitor Japan fund flow estimates in future monthly reports.
•Allocations to commodity strategies slowed in March, but were still positive. Mortgage strategies had the highest rate of allocations by product focus during the month and in Q1.
•Funds focusing on European markets experienced net investor redemptions in March while funds investing in Latin America had the highest rate of allocations.
•Market neutral and credit strategies had the highest rates of allocations in March. Distressed funds had their third straight month of net allocations and statistical arbitrage strategies continued a trend of redemptions in March.
Performance Review
Fixed Income (FI) Strategies
•The average return of all fixed income focused strategies was +0.48% in March and +2.39% year-to-date.
•Mortgage funds performed best in March, +1.25%, and distressed funds continued to post positive returns, +0.26%.
•Fixed income fund assets rose 1.82% in March to an estimated $675.3 billion. Investors added net $10.9 billion during the month.
Equity (EQ) Strategies
•The average return of all equity focused strategies was +0.27% in March and +1.62% YTD.
•Funds investing in emerging market equities had the best returns, +1.68%, followed by those investing in real estate related equity markets, particularly in emerging countries.
•Equity fund assets rose an estimated 1.15% to $836.8 billion in March. Investors allocated a net $3.98 billion during the month; a decline from February, but above the trailing six month average.
Commodity and Foreign Exchange (FX) Related Strategies
•Broad natural resource commodity strategies were -0.93% in March and +0.41% YTD.
•Funds investing in oil and energy markets performed well, +1.39% and metals sector funds returned an average of +0.44%. Average results were hurt most by quantitative focused trend following strategies.
•FX funds were +0.14% in March and -1.09% in Q1 2011. Agriculture commodity strategies performed better than average, +2.37% during the volatile month.
Summary Analysis
Investor interest in hedge funds was again high in March resulting in a very strong Q1 for industry growth. However, outside of the mortgage and energy sector, no other fund classification has a majority of its constituents outperforming equity markets in 2011. About 15% of the industry is currently beating the S&P.
Dow Jones Credit Suisse Core Hedge Fund Index Up 1.44% in April
The Dow Jones Credit Suisse Core Hedge Fund Index finished up 1.44% in April
Oliver Schupp, President of Credit Suisse Index Co., LLC, said, “After a downturn mid-month, the Dow Jones Credit Suisse Core Hedge Fund Index rebounded to finish up 1.44% in April. Managed Futures was the best performing sector, gaining 4.78% for the month as trading models successfully picked up on reversals in market movements across sectors.”
The Dow Jones Credit Suisse Core Hedge Fund Index provides the benefit of daily valuations which enables investors to more accurately track the impact of market events on the hedge fund industry. April, March and 2011 year-to-date performance is listed below and available at www.hedgeindex.com.
About the Dow Jones Credit Suisse Core Hedge Fund Index
Following the market events of 2008, increased attention has been focused on liquid hedge fund structures, including managed accounts, which tend to offer superior liquidity and transparency. The Dow Jones Credit Suisse Core Hedge Fund Index is the first and only hedge fund index designed to reflect the performance of managed accounts and other regulated fund structures sourced from multiple best-in-class managed account platforms, creating an unparalleled view of the liquid, investable hedge fund universe. This truly innovative approach represents a significant advantage over other indexes which are limited to the funds available on single managed account platforms and is designed to reflect the broadest representation of the liquid hedge fund universe with limited platform bias. Rebalanced quarterly, the Dow Jones Credit Suisse Core Hedge Fund Index is UCITS III compliant and includes 40 component funds.
The Dow Jones Credit Suisse family of hedge fund indexes also includes:
1. The Dow Jones Credit Suisse Hedge Fund Index, an asset-weighted benchmark that measures hedge fund performance and seeks to provide the most accurate representation of the hedge fund universe.
2. The Dow Jones Credit Suisse AllHedge Index, an investable index comprised of all 10 Dow Jones Credit Suisse AllHedge Strategy Indexes weighted according to the sector weights of the Broad Index.
3. The Dow Jones Credit Suisse Blue Chip Hedge Fund Index, an investable index comprised of 60 of the largest funds across the 10 style-based sectors in the Broad Index.
4. The Dow Jones Credit Suisse LEA Hedge Fund Index, an asset-weighted, composite index which provides insight in to three specific regions of the emerging markets hedge fund universe (Latin America, EEMEA (Emerging Europe, Middle East and Africa) and Asia).
Oliver Schupp, President of Credit Suisse Index Co., LLC, said, “After a downturn mid-month, the Dow Jones Credit Suisse Core Hedge Fund Index rebounded to finish up 1.44% in April. Managed Futures was the best performing sector, gaining 4.78% for the month as trading models successfully picked up on reversals in market movements across sectors.”
The Dow Jones Credit Suisse Core Hedge Fund Index provides the benefit of daily valuations which enables investors to more accurately track the impact of market events on the hedge fund industry. April, March and 2011 year-to-date performance is listed below and available at www.hedgeindex.com.
About the Dow Jones Credit Suisse Core Hedge Fund Index
Following the market events of 2008, increased attention has been focused on liquid hedge fund structures, including managed accounts, which tend to offer superior liquidity and transparency. The Dow Jones Credit Suisse Core Hedge Fund Index is the first and only hedge fund index designed to reflect the performance of managed accounts and other regulated fund structures sourced from multiple best-in-class managed account platforms, creating an unparalleled view of the liquid, investable hedge fund universe. This truly innovative approach represents a significant advantage over other indexes which are limited to the funds available on single managed account platforms and is designed to reflect the broadest representation of the liquid hedge fund universe with limited platform bias. Rebalanced quarterly, the Dow Jones Credit Suisse Core Hedge Fund Index is UCITS III compliant and includes 40 component funds.
The Dow Jones Credit Suisse family of hedge fund indexes also includes:
1. The Dow Jones Credit Suisse Hedge Fund Index, an asset-weighted benchmark that measures hedge fund performance and seeks to provide the most accurate representation of the hedge fund universe.
2. The Dow Jones Credit Suisse AllHedge Index, an investable index comprised of all 10 Dow Jones Credit Suisse AllHedge Strategy Indexes weighted according to the sector weights of the Broad Index.
3. The Dow Jones Credit Suisse Blue Chip Hedge Fund Index, an investable index comprised of 60 of the largest funds across the 10 style-based sectors in the Broad Index.
4. The Dow Jones Credit Suisse LEA Hedge Fund Index, an asset-weighted, composite index which provides insight in to three specific regions of the emerging markets hedge fund universe (Latin America, EEMEA (Emerging Europe, Middle East and Africa) and Asia).
HEDGE FUNDS ADVANCE +1.36% IN APRIL
Shorting Continues to Hurt Performance
The Hennessee Hedge Fund Index advanced +1.36% in April (+3.85% YTD), while the S&P 500 advanced +2.85% (+8.43% YTD), the Dow Jones Industrial Average increased +3.98% (+10.65% YTD), and the NASDAQ Composite Index gained +3.32% (+8.32% YTD). Bonds advanced, as the Barclays Aggregate Bond Index increased +1.27% (+1.71% YTD) and the Barclays High Yield Credit Bond Index advanced +1.55% (+5.49% YTD).
“Hedge funds are underperforming for the year as the investment environment remains challenging for alpha generation,” said Lee Hennessee, Managing Principal of Hennessee Group. “While managers generated gains in long portfolios as equity markets continued to rally, shorting continues to work against hedge fund managers, detracting from performance.”
“Over the past couple months, the markets have brushed off negative news, including conflict in the Middle East, rising oil prices, S&P downgrading U.S. debt, and lower than expected GDP. Markets have continued to rally with the Russell 2000 hitting an all time high and the NASDAQ reaching a 10 year high,” commented Charles Gradante, Co-Founder of Hennessee Group. “Some managers feel that the government’s monetary policy and stimulus is distorting asset prices and encouraging risk taking. The markets may be underestimating the amount of risk in asset prices, credit spreads and other factors.”
Solid corporate profits and prospects for continued low interest rates led to broad based gains in the equity markets in April. The Hennessee Long/Short Equity Index advanced +1.55% in April (+4.33% YTD). While managers were able to generate gains during the month, they continued to suffer from short positions and hedges and lagged on a relative basis. While large-cap stocks outperformed small caps stocks in April, the Russell 200 Index rose a solid +2.6% and reached a new all time high during the month. From a sector perspective, nine out of the ten sectors experienced gains. Health care rose an impressive +6.4%, buoyed by a combination of better than expected profit growth and increased merger activity. Despite increasing commodity costs and concerns regarding potential margin compression, stocks within the consumer staples sector were up a solid +5.1% in April. Financials (-0.1%) were the sole sector to experience losses during the month as a number of major banks disappointed during earnings season. While managers are encouraged by the solid earnings reports, ongoing accommodative policies and reasonable valuations, they remain cautious as there are a number of headline risks (sovereign debt, inflation, geopolitical unrest, etc.) that could derail the equity markets in the near term.
“We are seeing more managers favor large capitalization, multinational companies,” commented Charles Gradante. “Large cap, multinational companies have underperformed significantly in recent years and are currently selling at attractive valuations relative to small and mid cap stocks. In addition, many of these companies have large exposure to rapidly growing emerging economies, which will provide good growth opportunities.”
The Hennessee Arbitrage/Event Driven Index advanced +0.85% in April (+4.47% YTD). Credit markets rallied with the Barclays Aggregate Bond Index increasing +1.27% (+1.71% YTD). High yield bonds also rallied, returning +1.55%, as yields declined. High yield bonds were yielding +6.83% at month end, 24 bps tighter for the month and 72 bps tighter for the year. The Hennessee Distressed Index increased +0.93% in April (+5.57% YTD). Managers benefited from the market rally while hedges detracted from performance. For the second month in a row, there was only one company that defaulted in the leveraged credit markets. Managers state that accommodative capital markets will keep defaults low and many are expecting the default rate to fall to as low as 1% in 2011. The Hennessee Merger Arbitrage Index advanced +0.95% in April (+3.54% YTD). Managers generated gains as spreads tightened and equity markets continued to rally. Deal activity has picked up thus far in 2011, and managers expect it to continue as most investment grade companies are able to issue debt in the low single digit range and have $1 trillion of cash on their balance sheets. The Hennessee Convertible Arbitrage Index returned +0.171% (+4.40% YTD) in April. Convertibles closed the month slightly cheaper as volatility declined significantly. The new issue market and secondary trading were very quiet in April resulting in a somewhat uneventful month.
“Gold, silver and oil were strong performers in April,” commented Charles Gradante. “While silver and gold experienced a correction over the last few days, most managers believe silver and gold will continue to increase until there is evidence of a rise in interest rates, which would strengthen the dollar.”
The Hennessee Global/Macro Index advanced +1.78% in April (+2.01% YTD). Global equity markets rallied with the MSCI EAFE returning +6%, its best monthly performance this year. Despite investors’ worries about inflationary pressures in major emerging market economies, equities rose in April, with the MSCI Emerging Market Index returning +2.8%. However, a significant amount of the gains in foreign equities was due to a substantial decline in U.S. dollar, as gains were less in local currency terms. The U.S. Dollar Index fell -3.9% last month. Hedge funds were positive, with the Hennessee International Index increasing +1.40% (+2.74% YTD) and the Hennessee Emerging Market Index increasing +2.28% (+3.38% YTD). The Hennessee Macro Index gained +1.45% for the month (+0.39% YTD). Macro managers posted gains as risk assets rallied, commodities rose strongly, and the dollar weakened. The dollar weakening was a key theme in April reaching levels not seen since 2008. Several managers were caught in a short term long dollar trade and experienced losses. Longer term, most believe the dollar is going to continue to weaken. Oil rallied strongly during the month as investors remain concerned about tension in the Middle East. Precious metals continued to rally with gold increasing +8.1% (+9.3% YTD), reaching another record high, and silver advancing +28% (+56.9% YTD).
* For a more in depth monthly review of the economy, capital markets, and hedge fund performance and strategies, the Hennessee Group offers the monthly Hennessee Hedge Fund Review.
About the Hennessee Group LLC
Hennessee Group LLC is a Registered Investment Adviser that consults direct investors in hedge funds on asset allocation, manager selection, and ongoing monitoring of hedge fund managers. Hennessee Group LLC is not a tracker of hedge funds. The Hennessee Hedge Fund Indices® are for the sole purpose of benchmarking individual hedge fund manager performance. The Hennessee Group does not sell a hedge fund-of-funds product nor does it market individual hedge fund managers. For additional Hennessee Group Press Releases, please visit the Hennessee Group’s website. The Hennessee Group also publishes the Hennessee Hedge Fund Review monthly, which provides a comprehensive hedge fund performance review, statistics, and market analysis; all of which is value added to hedge fund managers and investors alike.
Description of Hennessee Hedge Fund Indices®
The Hennessee Hedge Fund Indices® are calculated from performance data reported to the Hennessee Group by a diversified group of hedge funds. The Hennessee Hedge Fund Index is an equally weighted average of the funds in the Hennessee Hedge Fund Indices®. The funds in the Hennessee Hedge Fund Index are derived from the Hennessee Group’s database of over 3,500 hedge funds and are net of fees and unaudited. Past performance is no guarantee of future returns. ALL RIGHTS RESERVED. This material is for general information only and is not an offer or solicitation to buy or sell any security including any interest in a hedge fund.
"Alternative Alternatives" investment funds lost 0.14% in March, +0.66% YTD
Opalesque Ltd., a leading provider of online information services to the alternative investment industry, announced the results of the Opalesque A SQUARE ('alternative-alternatives') indices covering the performance of niche alternative investment funds. The indices are calculated based on the net performance of 605 single- and multi-manager funds currently listed in 22 categories in the Opalesque Solutions A SQUARE Fund Database (Source).
The Opalesque A SQUARE Index lost* 0.14% in March after an estimated gain of 0.8% through February, bringing the year-to-date performance to +0.66%.
The A SQUARE Funds of Funds Index performed almost flat in March with a loss of 0.08% after gaining an estimated 0.94% through February. Year-to-date, the index gained 0.86%.
Over the last 12 months, performance of the A SQUARE Index ranged between a gain of 3.12% in September 2010 and a loss of 1.97% in May 2010, with 9 positive and 3 negative months. In a difficult month affected by political unrests in the MENA region and the Japan quake, "Alternative Alternatives" funds performed similar to hedge funds: The HFRI Fund Weighted Composite Index returned 0.01% in March (+9.98% over the last 12 months). The MSCI World Index, however, posted a loss of 1.24% in March (+12.34% over the last 12 months).
In terms of absolute and relative risk, both the A SQUARE Index and the A SQUARE Funds of Funds Index did better than their benchmarks over the analyzed 12-month period: Volatility (defined as annualized standard deviation) was 5.05% for the A SQUARE Index and 5.21% for the FoF Index, compared to 6.18% for the HFRI and over 19.54% for the MSCI World. The maximum drawdowns in the last 12 months were 2.35% for the A SQUARE Index and 3.12% for the A SQUARE Funds of Funds Index, compared to 3.84% for the HFRI and 13.7% for the MSCI World.
Market risk, measured by the corresponding beta values, was low for both A SQUARE indices, a result of the small volatility and low correlation of the funds listed in the A SQUARE database with both equity markets and hedge fund strategies (0.22 and 0.79 respectively for the A SQUARE Index).
Historically, the A SQUARE single manager funds delivered steady, double-digit returns from 2004 to 2010 (with the exception of the financial crisis year 2008), ranging between 10.94% in 2010 and 14.85% in 2005, and outperforming the HFRI Fund Weighted Composite Index four times. During the crisis year of 2008, the A SQUARE Index provided significant downside protection, ending the year 2008 down 5.87%, compared to a HFRI decline of around 20%.
* Estimated numbers of the last 3 months are based on a calculation conducted on the 27th of the actual month. Earlier results are locked.
The Opalesque A SQUARE Index lost* 0.14% in March after an estimated gain of 0.8% through February, bringing the year-to-date performance to +0.66%.
The A SQUARE Funds of Funds Index performed almost flat in March with a loss of 0.08% after gaining an estimated 0.94% through February. Year-to-date, the index gained 0.86%.
Over the last 12 months, performance of the A SQUARE Index ranged between a gain of 3.12% in September 2010 and a loss of 1.97% in May 2010, with 9 positive and 3 negative months. In a difficult month affected by political unrests in the MENA region and the Japan quake, "Alternative Alternatives" funds performed similar to hedge funds: The HFRI Fund Weighted Composite Index returned 0.01% in March (+9.98% over the last 12 months). The MSCI World Index, however, posted a loss of 1.24% in March (+12.34% over the last 12 months).
In terms of absolute and relative risk, both the A SQUARE Index and the A SQUARE Funds of Funds Index did better than their benchmarks over the analyzed 12-month period: Volatility (defined as annualized standard deviation) was 5.05% for the A SQUARE Index and 5.21% for the FoF Index, compared to 6.18% for the HFRI and over 19.54% for the MSCI World. The maximum drawdowns in the last 12 months were 2.35% for the A SQUARE Index and 3.12% for the A SQUARE Funds of Funds Index, compared to 3.84% for the HFRI and 13.7% for the MSCI World.
Market risk, measured by the corresponding beta values, was low for both A SQUARE indices, a result of the small volatility and low correlation of the funds listed in the A SQUARE database with both equity markets and hedge fund strategies (0.22 and 0.79 respectively for the A SQUARE Index).
Historically, the A SQUARE single manager funds delivered steady, double-digit returns from 2004 to 2010 (with the exception of the financial crisis year 2008), ranging between 10.94% in 2010 and 14.85% in 2005, and outperforming the HFRI Fund Weighted Composite Index four times. During the crisis year of 2008, the A SQUARE Index provided significant downside protection, ending the year 2008 down 5.87%, compared to a HFRI decline of around 20%.
* Estimated numbers of the last 3 months are based on a calculation conducted on the 27th of the actual month. Earlier results are locked.
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