Greenwich Van Predicts Double-Digit Hedge Fund Returns In 2006

by Carla Johnson, Investors Offshore.com

25 September 2006

The Greenwich-Van Global Hedge Fund Index returned 0.97% in August, putting hedge funds back on track for double-digit returns in 2006, Greenwich-Van Advisors LLC said in its mid-month report.

"All hedge fund strategies followed by Greenwich-Van, except for macro and short sellers, posted positive results in August," noted Wade McKnight, Vice President of Greenwich-Van.

He added:

“Investors, for the most part, have become more optimistic that the Federal Reserve can control economic activity without stimulating a recession. This phenomenon created a nice backdrop for many hedge fund managers in August. Equity-based strategies benefited most from the August rally."

"Meanwhile, income managers, who invest primarily in yield-producing securities with a focus on current income, came in second, as a result of the broad credit market rally. All hedge fund strategies, according to the Index, are positive year-to-date.”

The Greenwich Van index was up 6.65% year-to-date in August, and the company expects that by the end of 2006, the index will have returned more than 10%.

By strategy, Greenwich Van reported that the Long/Short Equity Group returned 1.43% in August (6.79% YTD) as managers were helped by gains in most traditional equity benchmarks. Greenwich-Van’s Global Value, Aggressive Growth, Opportunistic and Short Selling Indices returned 1.72% (7.24 YTD), 1.50% (5.56% YTD), 1.05% (7.11% YTD) and -1.65% (+2.30% YTD), respectively.

The Specialty Strategies Group, comprised of emerging markets, income and multi-strategy hedge fund strategies, returned 0.81% in August (8.35% YTD). Emerging markets in August were relatively quiet, characterized by low liquidity and reticent new issuance.

The Treasury market, on the other hand, rallied strongly as 5 and 10-year yields declined subsequent to the Fed’s decision to temporarily halt rate hikes. The Greenwich-Van Global Income, Emerging Markets and Multi-strategy indices returned 1.14% (5.86% YTD), 0.91% (10.17% YTD) and 0.38% (6.38% YTD), respectively.

The Market Neutral Group yielded 0.75% in August (7.28% YTD). The arbitrage strategies continue to deliver strong returns in 2006. Improving credit spreads, a strengthening bond market, and slightly higher single stock volatility created a very good environment for convertible traders in August, the company said.

"After a difficult 2005, traders in the convertible space are now finding exceptional mis-pricing opportunities. Assets have returned and the strategy is performing well," Greenwich Van reported.

The Greenwich-Van Global Event Driven, Market Neutral Arbitrage and Equity Market Neutral Indices returned 1.06% (8.13% YTD), 0.80% (7.68% YTD) and 0.03% (4.47%YTD) in August, respectively.

The Directional Trading Group, comprised of futures, market timing and macro-oriented hedge fund strategies, returned 0.40% in August (2.97% YTD). Solid gains in the currency and fixed income markets helped many futures managers during August, while weakening energy prices detracted from performance. The Greenwich-Van Global Futures and Macro indices returned 0.51% (1.93% YTD) and -0.07% (+4.11% YTD), respectively in August.

Meanwhile, the Greenwich-Van Investable Hedge Fund Index, comprised of 45 funds, returned 0.88% in August (5.09% YTD).

Since its inception in January 2003, the Investable Index achieved an annualized return of 10.12% versus 11.26% for the Greenwich-Van Global Hedge Fund Index. Cumulatively from inception through July, the investable index has gained 42.42% compared to 47.89% for the non-investable index.

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