Wed, 16/01/2008 - 06:00
The Greenwich Global Hedge Fund Index returned 0.61 per cent in December and 11.15 per cent in 2007, outperforming traditional benchmarks for US, UK and global equities as well as bonds over both the month and year, while the Credit Suisse/Tremont Hedge Fund Index was up 0.47 per cent in December and 12.56 per cent for the year as a whole.
Greenwich Alternative Investments, which compiles the former Van Hedge Index, notes that the S&P 500 declined by 0.69 in December and gained 5.50 per cent during 2007, while the MSCI World Equity Index fell by 1.37 per cent over the month but rose 6.49 per cent over the year, and the FTSE 100 returned 0.38 per cent and 3.80 per cent respectively. The Lehman Aggregate Bond Index posted a December return of 0.28 per cent and gained 6.96 per cent for the full year.
'Hedge funds have demonstrated their resilience to downward moves in the equity markets,' says Greenwich senior vice-president Ben Rossman. 'Hedge funds outperformed the S&P 500 by more than 5.5 per cent in 2007 through a combination of capturing market upside and protecting against downside.
'This is hedge funds' highest level of outperformance since 2002, when the S&P 500 was down more than 22 per cent and hedge declined less than 1 per cent. Over the last three years, hedge funds have outperformed the S&P 500 by roughly 2 per cent on an annualised basis, despite the S&P having roughly 50 per cent more risk associated with its returns.'
The Greenwich Composite Investable Index returned 0.27 per cent in December and was up 3.61 per cent for the full year. The Investable Index, comprising 49 constituent funds, adds investibility, active management and liquidity to the diversification and performance benefits of the broad Greenwich Global Hedge Fund Index. It references actual hedge fund vehicles as opposed to separately managed accounts or other methods used to replicate industry returns.
Oliver Schupp, president of Credit Suisse Index, notes that the December industry performance came amid global market weakness and signed of stress in the US economy. 'Global market indices were relatively flat for December,' he says. 'The US continued to show weakness in many sectors as the credit crunch of 2007 continued to affect financial markets worldwide - US manufacturing indicators were at their lowest since April 2003.
'At the December 11 Federal Open Market Committee meeting, the Federal Reserve cut rates for the third straight time and also lowered the discount rate. In the UK, a slowdown in manufacturing growth pushed the Bank of England to cut the benchmark interest rate for the first time in two years.
'Crude oil ended the year at USD95.98 per barrel, a 57 per cent surge over the 2006 year-end figure, and had flirted with the USD100 mark over the prior two months. Overall, this market environment has resulted in eight out of 10 hedge fund sectors ending December on a positive note.'
The Credit Suisse/Tremont Hedge Fund Index comprised 481 funds as of December 31. It is constructed using the Credit Suisse/Tremont database of more than 5,000 hedge funds and includes both open and closed funds located in the US and offshore, but not funds of funds.
To qualify for inclusion in the index selection universe, a fund must have a minimum of US50m under management, a 12-month track record, and audited financial statements. Funds are selected using a formula based on assets under management, ensuring that the Index represents at least 85 per cent of total assets in each of 10 strategy-based sectors in the selection universe.
As well as the Hedge Fund Index, the Credit Suisse/Tremont family of indices includes the AllHedge Index, an investible index comprising all 10 Credit Suisse/Tremont Sector Invest indices weighted according to the sector weights of the broad index, and the Blue Chip Index, an investible index consisting of 60 largest funds across the 10 style-based sectors.
The AllHedge Index was up an estimated net 0.31 per cent in December, while the confirmed performance for November was a decline of 1.18 per cent, leaving the index up 8.82 per cent in 2007. The Blue Chip Index was up an estimated 0.15 per cent net for December, and after a confirmed decline of 1.08 per cent in November, the index gained 7.36 per cent for the year.
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