The Van Global Hedge Fund Index rose 2.3% net of fees in December and ended 2003 with an 18.2% net gain, according to preliminary results announced today by Van Hedge Fund Advisors International(VAN). The Index reflects the average net return of hedge funds worldwide that report to VAN, a leading hedge fund consultant. The Index, a widely cited benchmark for hedge fund performance, has beenpositive in each of the sixteen years since its 1988 inception.
“Hedge funds had their best year in 2003 since 1999,” stated George Van, Chairman of VAN. “I think investors can be pleased that hedge funds generally lived up to expectations in preserving capital through the lean years of the bear market and then returning to double-digit gains as conditions improved in 2003.”
The preliminary December index was based on over 300 hedge fund returns. Its 2.3% net gain lags the S&P 500’s December return of 5.2% but slightly beats the NASDAQ’s 2.2% return. Positive hedge fund returns were common for the month among a variety of strategies, with approximately 85% of funds profitable. Only about 14% of funds, however, were able to outperform the S&P 500, which had a strong month thanks to continued signs of improvement in the U.S. economy.
The average hedge fund did not keep pace with equities for the full year, either. The S&P 500 ended 2003 with a 28.7% gain while the NASDAQ rose 50.8%. Due to their use of short selling and other hedging tactics, hedge funds are often unable to compete with a rebounding stock market. Certain types of hedge funds, however, such as those following Emerging Markets, Distressed Securities, and Aggressive Growth strategies, performed particularly well last year and appear to have averaged gains comparable to or better than the S&P. VAN will release December and year 2003 results for the Index’s various strategy components later in the month.
From the inception of the Van Global Hedge Fund Index through December 2003, the Index has produced a compound annualized return of 16.0%. The Index is based on hedge fund performance after the deduction of hedge fund fees and expenses. Historical performance of the Index may be viewed at www.hedgefund.com.
An updated December Van Index, based on a larger sample of funds, will be released in mid-January; final results for December will be available at www.hedgefund.com at the beginning of next month. Mid-month and month-end versions of the Van Hedge Fund Indices show hedge fund performance on a global, a U.S. and an offshore basis, as well as by individual investment strategy.
Van Hedge Fund Advisors International, LLC (“VAN”) is a global hedge fund advisory firm which constructs hedge fund portfolios for international institutions and wealthy investors. VAN bases its work on its pioneering research on hedge funds begun in the early 1990s and by drawing on a hedge fund database which it believes to be the world’s largest.
