Hedge Funds Even for Q1 2009

Hedge funds either gained .5% in the first quarter of 2009, or lost .1%, depending on which index you follow. Hedge Fund Research showed a .5% first quarter gain, while Morningstar's 1000 Hedge Fund Index posted a miniscule .1% decline. Total hedge fund industry capital fell to $1.33 billion, $600 billion below its peak.

Hedge Fund Returns for January and February 2009

Hedge fund returns January and February 2009
Credit Suisse/Tremont Hedge Fund Index

Index Value Return Currency Feb 09 Jan 09 Feb 09 Jan 09 YTD Credit Suisse/Tremont Hedge Fund Index USD 351.78 354.92 -0.88% 1.09% 0.20% Convertible Arbitrage USD 236.04 234.29 0.75% 5.72% 6.51% Dedicated Short Bias USD 95.19 92.22 3.22% 3.69% 7.03% Emerging Markets USD 258.57 264.12 -2.10% -0.14% -2.24% Equity Market Neutral USD 215.25 228.05 -5.61% 1.14% -4.53% Event Driven USD 394.12 398.64 -1.13% 0.79% -0.35% Distressed USD 446.52 451.93 -1.20% -0.06% -1.25% Multi-Strategy USD 371.75 375.97 -1.12% 1.33% 0.19% Risk Arbitrage USD 280.60 278.68 0.69% 0.38% 1.07% Fixed Income Arbitrage USD 169.28 167.59 1.01% 0.48% 1.49% Global Macro USD 597.54 596.27 0.21% 2.33% 2.55% Long/Short Equity USD 395.92 401.28 -1.34% -0.17% -1.51% Managed Futures USD 282.15 282.61 -0.16% -0.56% -0.72% Multi-Strategy USD 284.77 285.03 -0.09% 3.35% 3.26%

Hedge Fund Returns Positive in March, Q1 2009

Hedge Funds Returned 1.8% in March, 2009 and were up fractionally for the first quarter of 2009.

Hedge fund returns for March were up 1.8%, led by returns from equity funds which were up more than 3% on average, according to Hedge Fund Research. Hedge funds were up .5% for the entire first quarter of 2009.

Though hedge funds certainly could use a positive month of returns, the 1.8% gain didn't come close to matching the 8% + return of the S&P 500 in March. However, the modest gain for hedge funds in Q1 was far better than the 11% decline posted by the S&P during that time.

Hennessee Hedge Fund Index down 5.52% for October

The Hennessee Hedge Fund Index was down 5.5% in October, less than other hedge fund indeces had predicted. The Barclay Hedge Fund Index, which tracks a slightly different basket, was earlier looking for a 6% + decline in October.

The 5.5% drop in October, was actually a slowing in the pace of declines. The Heennessee Hedge Fund Index was down more than 6.2% in September and is now down more than 15% ytd.

Ironically, the biggest declines were in hedge fund strategies that are typically viewed as being more market neutral such as convertible arbitrage (though this strategy can be highly correlated if managers are net long convertibles) which lost more than 10% in October. The smallest declines came from merger arbitrage (down less than 1%) and the international index (down 4%). The long-short index was down more than 5% for the second straight month, again bringing into question why long-short hedge fund managers have returns that are so highly correlated with long only portfolios.

Best and Worst Months for Hedge Fund Returns

December is the best month for hedge fund performance since 1997. Between 1997 and 2008, the Barclay Hedge Fund Index averaged 2.14% in December compared with a .95% average monthly gain over the time period. The worst month for hedge fund returns was August, with an average return of -.14%, the only month with a negative return.

The best season for hedge fund returns has been the fall, averaging 4.64%. The worst season for hedge fund returns has been the summer, averaging only .84%.

Average Hedge Fund Returns by Season/Quarter 1997-2008
Winter (Q1) Spring(Q2) Summer (Q3) Fall (Q4)
3.16% 2.89% .84% 21.4%

Average Monthly Hedge Fund Returns 1997-2008
J F M A M J J A S O N D

1.2%

1.2%

0.7%

1.1%

0.8%

1.0%

0.3%

-0.1%

0.7%

0.9%

1.4%

2.1%