Emerging Markets Drove '06 Hedge Fund Returns, Says CS/Tremont

by Phillip Morton, Investors Offshore.com

19 January 2007

The Credit Suisse/Tremont Hedge Fund Index gained 1.83% in December, finishing the year with a total return of 13.86% according to Oliver Schupp, President of the Credit Suisse Tremont Index, LLC.

“A stronger than expected year was experienced as a favorable market environment drove the majority of hedge fund strategies to produce positive end of year results," Schupp noted.

"Record highs in global markets and mergers and acquisition activity along with a stronger than expected earnings season, a pause in the continual increasing of interest rates by the Federal Reserve, high energy prices and volatility fluctuations were positive contributors to hedge fund performance for 2006,” he observed.

Schupp revealed that global equity markets rallied in December as investors gained confidence that the global economy will continue to grow in 2007, in part from indications that the housing market would stabilize and from the US dollar gaining slightly against the euro and yen.

"Overall, this favorable market environment bolstered performance and the majority of hedge fund sectors ended December on a positive note with the Managed Futures sector as the best performing sector in December, up 4.05% and the Emerging Markets sector as the best performing sector for 2006 up 20.49%.” he explained.

Other categories of the Credit Suisse/Tremont Index that performed well last year included Event Driven, which gained 15.73%, Multi Strategy, which returned 14.54%, Long/Short Equity, which finished the year up 14.38%, and Convertible Arbitrage, which gained 14.3%.

Unsurprisingly, the Dedicated Short Bias category performed the worst, showing a year-end negative return of 6.61%.

The Credit Suisse/Tremont Index is constructed using a database of more than 4,500 hedge funds. It includes both open and closed funds located in the US and offshore, but does not include fund of funds. In order to qualify for inclusion in the index selection, a fund must have a minimum of US$50 million under management, a 12-month track record, and audited financial statements.

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