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HedgeCo.net (West Palm Beach) – Six months after their worst drawdown on record, hedge funds appear to be demonstrating stronger performance than in some previous recovery periods, such as during the Asian Currency Crisis and the Tech Bubble Burst events.

On average, it has taken hedge funds 13 months to recover from these market disruptions accordind to research peice by Credit Suisse Tremont Index LLC, the research reviews of how hedge funds have repositioned themselves in the first half of 2009 to generate positive returns for five out of the first six months of the year.

The report discusses how hedge funds, as measured by the Credit Suisse/Tremont Hedge Fund Index (“Broad Index”), have generated year-to-date returns of 7.2% through June 30, outperforming, with lower volatility, both key equity and bond indices. Some key takeaways from the report include:

The Convertible Arbitrage, Emerging Markets, and Global Macro sectors have received increased attention as investors began to regain their appetite for risk and global markets rallied.

Performance has improved across most sectors, with the bulk of returns for many strategies moving into positive territory for the year, with 80% of all funds reporting positive returns for the second quarter.

Overall industry assets under management have dropped approximately $18 billion since the end of the first quarter of 2009; we estimate industry assets totaled $1.3 trillion as of June 30 – down from $1.5 trillion at the end of 2008.

As of June 30, 2009, an estimated 9.6% of funds were classified as impaired, meaning they have either suspended redemptions, imposed gate provisions or sidepocketed assets.

Alex Akesson

Editor for HedgeCo.net
alex@hedgeco.net

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Morningstar.ca – Hedge fund managers, once the swashbuckling frontiersmen of international finance and subject of fawning cocktail party banter, have quickly gone from hero to goat. As the global credit bubble burst with a vengeance in 2008, so too did the oft-touted myth that these alternative strategies could deliver positive results in any market.

But those claims painted the universe with too broad a brush. There has always been a difference between arbitrage funds that isolated structural inefficiencies, and speculators that either didn’t hedge or used the ability to short stock as a means of leveraging directional bets. Clearly it should never have been expected that a fund that was short financials and long commodities, as many hedge funds were last year, would have a market neutral, "absolute return" profile. The majority of Canadian offerings fall into that camp, so it’s no surprise we’ve seen stark declines among many of our homegrown funds.

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Tags: absolute-return, arbitrage, banter, bets, bubble burst, cocktail-party, commodities, credit bubble, declines, frontiersmen, global-credit, goat, hedge-fund-managers, inefficiencies, international finance, morningstar ca, myth, speculators, vengeance