Equity Managers Lead Hedge Funds Higher In April

by Phillip Morton, Investors Offshore.com

25 May 2009

Hedge funds as measured by the Greenwich Global Hedge Fund Index (GGHFI) advanced during the month of April to move solidly into positive territory for 2009.

The GGHFI returned +3.49% while the Greenwich Composite Investable Index (GI2) gained +0.43% during the month, compared to global equity returns in the S&P 500 Total Return +9.57%, MSCI World Equity +10.91%, and FTSE 100 +8.09% equity indices. Year-to-date, the GGHFI and the GI2 have returned +3.91% and -2.81%, respectively, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have lost -2.50%, -2.96%, and -4.48%, correspondingly. 72% of constituent funds in the GGHFI ended the month with gains.

“Nearly all hedge funds strategy groups are now positive for 2009. An asset allocation shift from safe assets to equities was evident during the month of April as Long/Short equity managers led hedge funds higher,” notes Clint Binkley, Senior Vice President.

Market Neutral funds experienced another successful month during April, with both Event Driven and Arbitrage strategies gaining +2.80% and +2.56%, respectively. Convertible Arbitrage funds continued to find profitable opportunities as they advanced +7.2% on the month, bringing their total YTD gains to +17.34%. Fixed Income Arbitrage managers also posted solid gains of +2.48%. Distressed funds and Special Situations managers also moved decidedly higher by +2.27% and +5.38%, respectively. Only Merger Arbitrage funds declined (-0.09%) among Market Neutral managers in April.

Long/Short Equity managers were the strongest performing group of managers in April, returning +5.68% on the strength of surging global equity markets. Both Value and Growth-focused funds advanced on the month with value funds faring slightly better (+6.58% vs. +5.19%, respectively).

Short selling funds found themselves fighting a bullish market and lost (-6.32%) during the month.

Directional Trading funds continued to lag other hedge fund strategies in April,
declining -0.67% on average and remaining in negative territory (-1.67%) for the year. Managers specializing in trading futures lost -1.35% during the month, making them the second worst performing sub-strategy among hedge funds this year. Macro and Market Timing funds fared slightly better, gaining +1.41 and +0.51%, respectively.

Finally, Specialty Strategy managers were the second best performing group of hedge funds during the month as appetite for risk returned to emerging markets. Emerging Market managers gained +7.62%, the highest return of any sub strategy. Fixed Income and Multi-Strategy managers also posted modest advances, gaining +1.63% and +2.14%, respectively.

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