Lack of Correlation By Hedge Funds Apparent Over Long Run

New York (HedgeCo.Net) A HedgeCoVest follower on Twitter recently asked, facetiously we think, “what have hedge funds done over the last five years?” After research, we can tell you that from January 1, 2010 through the end of July, the SPDR S&P 500 ETF Trust (NYSE: SPY) gained 110% while the Credit Suisse Hedge Fund Index was up 36.9% during the same time period. We used the SPY so as to include the dividends paid by the stocks in the index.

We have stated this before, but we will point it out again, when the market is going straight up or is in one of the strongest bullish periods in history, yes a hedged portfolio is likely to lag the overall market. However, what happens when we include bearish periods in the results?

From January 1, 2000 through July 31, 2015, the Credit Suisse Hedge Fund Index gained 158.7% compared to a gain of 89.77% for the SPY over the same time period. If we look at the first decade of this century, from January 1, 2000 through December 31, 2009, the Credit Suisse Hedge Fund Index 88.97% while the S&P lost 9.63%.

One could argue that it is unfair to make the comparison between hedge funds and the overall market during the first decade of the 21st Century as there were two bearish phases and only one bullish phase in that ten-year period. However, looking at the data from the beginning of this century through the end of July includes two bullish phases and two bearish phases and yet the hedge fund index gained considerably more than the overall market—68.93% more to be exact.

Rick Pendergraft
Research Analyst
HedgeCoVest

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