Mon, 15/10/2007 - 08:06
Hedge fund managers averaged a decline of 1.79 per cent amid August's financial market turbulence, but performance varied widely, according to a survey of 5,255 fund products in the HedgeFund.net-PerTrac Online Universes, a group of more than 7,600 hedge funds, funds of funds and CTA/managed futures funds that report to HedgeFund.net.
More than 70 per cent of the funds reported negative returns, according to PerTrac. The 5th percentile return was a gain of 3.31 per cent while the 95th percentile return was a loss of -8.64 per cent. The standard deviation for the group was 4.05 per cent.
The HedgeFund.net-PerTrac Online collaboration offers registered users the ability to use PerTrac's peer group analysis tools in conjunction with HedgeFund.net data on a web-based platform.
'Based on the results of various hedge fund indices alone, one might conclude that hedge fund losses weren't as bad in August as many had expected due to volatile market conditions,' says PerTrac Financial Solutions managing director Meredith Jones.
'And while that is true, in general, index returns don't tell the whole story. Typical indexes simply report mean performance, either simple averages or asset-weighted averages. The average of a group's performance is obviously an important statistic, but it needs to be paired with an understanding of the distribution of returns.
'The percentile stats available from the HedgeFund.net-PerTrac Online Universes provide an important complement to traditional hedge fund indices, helping investors determine the value their hedge fund managers may or may not have added, and helping managers to more effectively position their fund amidst a sea of competitors.'
The distribution of returns in the overall universe is as follows: highest reported return at nearly 40 per cent, 5th percentile at 3.31 per cent, 10th percentile at 1.89 per cent, 20th percentile at 0.59 per cent, 25th percentile at 0.20 per cent, 30th percentile at -0.16 per cent, 40th percentile at -0.88 per cent, 50th percentile (median) at -1.51 per cent, 60th percentile at -2.11 per cent, 70th percentile at -2.78 per cent, 75th percentile at -3.23 per cent, 80th percentile at -3.83 per cent, 90th percentile at -5.84 per cent, 95th percentile at -8.64 per cent, lowest return at just below -45 per cent.
In addition to the overall universe of more than 7,600 funds, the HedgeFund.net-PerTrac Online Universes contain smaller strategy-specific universes, some of which showed an even more dramatic range of results for August.
For example, the CTA/managed futures universe, containing 403 fund products to date, posted a mean return of -2.86 per cent but with a standard deviation of 7.73 per cent, a 5th percentile at 6.90 per cent, and a 95th percentile at -10.73 per cent.
Preliminary results for September, based on more than 1,600 funds reporting to the Hedgefund.net-PerTrac Online Universes so far, show a dramatic rebound from the losses in August.
The mean return for September is 3.07 per cent, with the top 10 per cent of funds reporting an average return of 8.18 per cent and the bottom 10 per cent a loss of only -1.82 per cent. 'Funds as low as the 80th percentile are reporting positive returns for September,' Jones says.
'Based on this type of information, managers can more effectively position their funds with investors, putting losses or slightly positive returns in perspective following a notably volatile month,' Jones says.
'For example, in the CTA/Managed Futures performance distribution, managers that were essentially flat actually performed in the top 30 per cent of their investing peers. Performance of around 0.8 per cent in August puts a CTA/managed futures manager in the top 20 per cent of their peer group for those managers reporting thus far.
'Likewise, using percentile rankings and peer group analysis, an investor can make a more informed decision about whether a particular investment has performed well or poorly. For example, in the statistical arbitrage category, the mean performance reported thus far was -0.22 per cent.
'However, a manager who returned that amount actually ranked below the 60th percentile. To have ranked in the top 50 per cent of funds, a manager would actually have needed to have returned more than 0.47 per cent.'
PerTrac Online subscribers can use PerTrac tools to see how a particular fund ranks against its peers on a percentile basis, either in the overall universe or within its strategy-specific universe. Other features include advanced searching and screening tools, side-by-side fund comparisons, and a performance watch List.
The PerTrac Analytical Platform, an investment analysis and asset allocation desktop software application, offers an even broader set of features, including a peer group analysis package. Users can generate reports revealing how a fund ranks against its peers based not only on last month's returns, but also on risk and risk-adjusted return statistics over a number of time spans.
The PerTrac Analytical Platform is used by more than 1,700 clients in 50 countries, including banks, brokerage firms, consultants, plan sponsors, family offices, investment managers and funds of funds. Last year's acquisition of Whittaker Garnier added PerTrac CMS, a tool for managing the client relationships and workflow associated with capital raising, investor relations, and investment management, used by nearly 300 alternative investment firms.
In June this year the firm announced the beta release of PerTrac Portfolio Manager, a software application designed to help funds of funds and institutional investors create, monitor and manage multi-manager portfolios of alternative investments. PerTrac Financial Solutions is based in New York with offices in London, Hong Kong, Reno, Memphis and Tokyo.
HedgeFund.net, a division of Channel Capital Group Inc, is a source for hedge fund news and information that offers accredited investors, including institutional investors and high net worth individuals, access to an online database of more than 7,600 hedge funds, funds-of-funds and CTA/managed futures products.
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