Global Macro Is Top Hedge Fund Style This Year

by Carla Johnson, InvestorsOffshore.com, London

20 August 2001

The CSFB/Tremont Hedge Fund Index is flat at 0.0% for July 2001, according to Roland Lorenzo, President and Chief Operating Officer of Credit Suisse First Boston Tremont Index LLC.

"Absolute return strategies continue to provide uncorrelated returns for investors," said Mr. Lorenzo. "The CSFB/Tremont Hedge Fund Index stands alone in the plus column year-to-date -- up 2.1% -- as compared with all other widely followed indices."

"The dedicated short bias funds supplied much-needed protection against downside risk, finishing the month up a substantial 4.1%," added Robert I. Schulman, President of Tremont Advisers. "Short-selling is an important risk management tool as markets continue to disappoint."

Other winning strategies in July were Covertible Arbitrage, up 1.1%, Fixed Income Arbitrage, up 0.9%, Global Macro, up 0.7%, and Event-Driven, up 0.5%. Year to date, the best strategies are Global Macro, up 12.2%, Convertible Arbitrage, up 9.7% and Event-Driven, up 7.9%.

The CSFB/Tremont Hedge Fund Index is comprised of 375 funds as of July 1, 2001, up from 339 funds. The Index is reselected quarterly, and 47 funds were added in July, while 11 were dropped. The Index is constructed using a database of more than 2,600 hedge funds. It includes both U.S. and offshore funds, but does not include funds of funds. Funds are not excluded until they liquidate or fail to meet the financial reporting requirements, in order to minimize survivorship bias. In order to qualify for inclusion in the universe, a fund must have US $10 million under management and an audited financial statement. The Index is calculated on a monthly basis and adjusted for capitalization and return.

London advisory firm CrossBorder Capital says that rising global liquidity points to an upturn in equity markets in the second half and to a revival among the major economies by early 2002. It says its models recommend raising exposure to equities at the expense of bonds, and are still positive for the US versus other regions and for the US dollar. It suggests further reductions in exposure to low beta funds and greater emphasis on directional funds. Equity hedge funds are overweight for the first time in a year. Macro funds remain the firm's most favoured style category.

CrossBorder Capital is not alone in recommending Global Macro, but the problem with it is that most established Global Macro funds are closed, while newer ones have uncertain prospects.

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