HFRX Performance for August 2009

HFRX results are in for August. The overall hedge fund index was only up 0.17%. Equity market neutral performed particularly poorly and systematic diversified very well. Other results are in the table:

Credit Suisse/Dow Jones Hedge Fund Index Performance July 2010

Credit Suisse have now reported for July 2010:



They report an average return of 1.59%, a bit below HFRI's preliminary 1.82%.

Hedge Fund Index Performance July 2010

Preliminary results for the HFRI index:


Overall, hedge funds gained 1.82% vs. a 8.17% gain in global equities. As a result of the latter, short bias funds performed worst. HFRX gained 1.23% for the month.

Early View: HFRI and Credit Suisse Dow Jones

HFRI is reporting a -0.81% return for hedge funds in June while Credit Suisse Dow Jones is reporting -0.88% with 77% of assets reporting. This compares with a HFRX return of -0.94%. I will report more when the final numbers for the month are in.

HFRX Indices June 2010 Performance Notes

The HFRX Global Hedge Fund Index declined by -0.94% for the month of June, bringing the YTD 2010 performance to -1.20%.

The weakest area of hedge fund industry performance was Equity Hedge strategies, with the HFRX Equity Hedge Index declining by -1.38% in June. All EH sub-strategies posted declines for June, with the most significant weakness in Fundamental Growth strategies, which declined by -2.85% for the month. Fundamental Value strategies posted more modest declines, with these posting a loss of -0.65%, while Equity Market Neutral declined by -0.77% in June, maintaining a gain of +1.93% for the 1H10.

Partially offsetting weakness in Equity Hedge, the HFRX Relative Value Arbitrage Index posted a gain of +0.29%, adding to the YTD gains to post a +1.29% gain for 1H10. Credit-focused Convertible Arbitrage and RV: Multi-Strategies were positioned for the financial market volatility and falling US yields which ensued in June, with both posting small gains in June to add to YTD gains; with each of these gaining +1.92% and +3.23% for 1H10, respectively.

The HFRX Macro Index posted a decline of -1.32%; as with the previous month, losses in fundamental, discretionary Macro strategies offset gains in Systematic trend following strategies. In total, Macro strategies have declined by -2.32% in 1H10 but the diversified, quantitative, systematic, trend-following funds gained +0.64 in June, with long positions in developed market fixed income offset weakness in currencies & commodities. Similar to the Financial Crisis of 2008, Systematic Macro strategies are the top areas of industry performance in 1H10, posting a gain of +4.53%.

The HFRX Event Driven Index posted a decline of -0.53% on corporate credit weakness, slowing M&A environment, increasing risk aversion and widening deal spreads, bringing 1H10 performance to -0.73%. The weakest area of ED performance was Distressed strategies, which declined by -3.73%, paring 1H10 gains to +0.38%. Merger Arbitrage and Special Situations funds posted declines of -0.58% and -0.48% in June to pare 1H10 performance in each of these to +0.13% and +0.03%, respectively.

Everest Financial to Wind Up Business

Following a strategic review, Everest Financial Group is to wind up the business, return capital to shareholders and transfer the funds under management to other firms. I have units in the EAIT and EDIF funds and am a shareholder in Everest Financial. This once seemed to be a successful business but the GFC hit it hard. Particularly damaging were the actions of activist hedge funds that resulted in reducing funds under management to far too small a scale for the company to go on. The book value of the shares exceeds the market value so hopefully we'll get something decent back and hopefully a decent manager will take over EAIT and EDIF.

"Dow Jones" Replaces "Tremont"

CREDIT SUISSE AND DOW JONES INDEXES JOIN FORCES ON HEDGE FUND INDEXES

Former Credit Suisse/Tremont Hedge Fund Indexes To Be Rebranded Dow Jones Credit Suisse Hedge Fund Indexes

New York (June 22, 2010) – Credit Suisse, one of the world's leading financial services providers, and Dow Jones Indexes, a leading global index provider, today signed an agreement which covers the calculation, licensing, branding and marketing of the hedge fund indexes formerly known as the Credit Suisse/Tremont Hedge Fund Indexes. Under this agreement, the indexes will be branded Dow Jones Credit Suisse Hedge Fund Indexes, and Dow Jones Indexes will calculate, distribute and market the indexes, while Credit Suisse affiliates will continue to manage the financial products linked to them. Credit Suisse and Dow Jones Indexes intend to keep the methodologies and rules for each of the existing indexes consistent with past practices.

Hedge Fund Index Performance May 2010

Credit Suisse/Tremont have published preliminary results for hedge fund performance in May:



The index lost 2.73% which is very similar to the HFRX result. All strategies lost except for short bias. Surprisingly though, managed futures lost 4.42% and equity market neutral lost 3.87% whereas HFRX found that systematic diversified and equity market neutral gained in May. HFRI also have
a "flash update":



They show slightly lower overall losses. Like HFRX they show gains for equity market neutral but small losses for systematic diversified and quantitative directional.

Daily HFRX Performance for May 2010

The Daily HFRX hedge fund indices show an overall loss of 2.64% for May. In comparison to the MSCI World Index's loss of 9.48% that's not too bad. All styles lost money with the exception of equity market neutral that gained 2.08% and systematic diversified which gained 1.03%. With reference to the latter, I know that Man-AHL lost only 0.1% for the month.

Hedge Fund Performance April 2010

The hedge fund performance figures for April from HFR and Credit Suisse/Tremont are in. Credit Suisse/Tremont reports that funds overall gained 1.24% in April. HFRI (preliminary) was at 1.29% and HFRX 0.80%. according to Credit Suisse/Tremont most strategies did well apart from short bias which lost 3.89%. Equity strategies that involved shorting performwed weakly. Equity market neutral made 0.43% and long-short equity 0.29%. HFRI reported similar results for strategies except that equity hedge came in at 1.37%. HFRX reports losses in macro and much more variability across strategies than the other two sources. It is based on a smaller sample of funds that report daily and seems to be less reliable.

Credit Suisse/Tremont Returns for March 2010

Credit Suisse reports similar results to HFRI for March.

HFRI Preliminary Performance March 2010

It was a good month for hedge funds. The HFRX Daily Index reports a 1.38% gain for March. But the HFRI (which includes more funds) reports a 2.70% gain. The only HFRI strategy that lost money was short bias, while a couple of HFRX strategies had negative returns. Equity market neutral was a weaker strategy this month returning 0.69% (HFRI) or -0.04% (HFRX) as was merger arbitrage: 0.95% or 0.73%. All other major HFRI strategies returned from 1 to almost 4%

Hedge Fund Returns for February 2010

Results are now in for both Credit Suisse/Tremont and HFRI. HFRI gained 0.52% (HFRX monthly 0.26%) and Credit Suisse/Tremont 0.68%. Managed futures, macro, long-short equity all did well according to CS and dedicated short bias and equity market neutral lost money. According to HFRI short bias also lost money and quantitative directional and systematic diversified gained 2.06% and 1.04% respectively but they find that equity market neutral gained moderately. Other styles moved less than 1% for both index providers.

HFRX Daily Hedge Fund Index Performance for February 2010

Always the first of the hedge fund indices to report, the HFRX daily index reports a gain of 0.26% for February. January saw a loss of 0.02%, so we're still pretty much flat for the year. There were no large moves for any of the strategies. Macro, Equity MArket Neutral, and Systematic Diverisifed saw gains of over 1%. No strategy lost more than 1%.

Credit Suisse/Tremont Returns for January 2010

Credit Suisse Tremont show a 0.17% gain for hedge funds in January. And in further contrast to HFRI's numbers they show Global Macro returning 1.07%. Managed futures lost 3.81% and long/short equity 1.50%. Fixed income, convertible arbitrage etc. did well.

Hedge Fund Performance for January 2010

HFRI reports a 0.71% loss for hedge funds globally in January 2010 while HFRX reported a 0.02% loss. By contrast, stock indices were down by several percent. Macro, systematic trading, and equity hedge strategies all lost money. Most fixed income and arbitrage strategies made money. Credit Suisse Tremont hasn't reported yet.

Monthly performance figures for December and annual figures for 2009 are now in for the HFRX monthly indices:



The Global Hedge Fund Index rose 0.55% for December and 13.40% for 2009. The best performing index for the year was the Russia Index while, not surprisingly Short Bias did worst. As I've been noting throughout the year, Convertible Arbitrage was the best performing of the traditional hedge fund strategies.

HFRX Daily Hedge Fund Index Performance for 2009

The Global Hedge Fund Index rose 0.55% in December and 13.40% for 2009. Performance over the last 3 or 4 years is negative. The MSCI All Country Gross World Index was up 35.41% this year, down 4.05% annually over the last three years and up 1.79% annually over the last 4 years. So its long run rate of return was higher but so was its volatility.

TFSMX at All Time High

At least one of my investments is at an all time high (when you include reinvested dividends). I have gained 27.6% since first investing in 2006. Year to date in 2009 the gain is 17.0%. All the previous profits and a little more were erased at the bottom in the GFC in November 2008 but the previous peak came in June 2008. The Sharpe ratio since inception is 0.67. By comparison the HFRI hedge fund index has a Sharpe ratio of 0.57 over the same period (and a lower rate of return). TFSMX has a beta to that index of 1.05 (R square is only 0.29 so its not a very good hedge fund proxy).

Fees for the fund are high by non-hedge fund standards and this stops some people from investing. But fees per se are irrelevant in my opinion and what really matters is performance after fees. TFS's managers have certainly earned their fees so far.

Australian "Hedge Fund" Investment Opportunities

I have a couple of prospectuses here for investments in Australian "hedge funds" but I think I will skip both:

Platinum Capital Share Purchase Plan: Existing shareholders can buy up to $A15,000 of shares in this listed hedge fund. The shares will be priced at a 5% discount to the average price over some period in February. However, the shares have been trading recently at a fairly high premium to net asset value (including an estimate of franking credits) of around 13%. The premium has been higher in the past - up to 30%. In October 2008 there was a negative premium of -24%. Over the last few years the premium has averaged 6%. Of course we have no way to know what the stock price will be in February. There is a risk that the premium could be even higher. So I prefer to skip this offer.

Everest Credit Opportunities Fund: This is a new offering from Everest Financial to invest in a fund of funds of credit strategies hedge funds. There is no closing date to the offer. Minimum investment is $A10k. As I have been reporting some credit strategies, and in particular convertible arbitrage, have been performing extremely well this year. This fund smacks of chasing high performers. The prospectus says that they expect these credit strategies to continue to perform well in coming years but I doubt the performance will be as good as this year. The initial fund allocation is as follows:



The long-term returns on these funds are fine. Management Expense Ratio at the fund of funds level is around 2.5% with no performance fees. So based on the long-term returns of the individual funds I think we could expect about an 8% return on the fund of funds. There is a 12 month initial lockup period after which funds can be redeemed quarterly with 120 days notice. Given these facts, the relatively large initial investment, and my existing exposure to these kind of strategies via the Everest Alternative Investment Trust, I think I will give this one a miss too.