HedgeFund.net Average Off To Solid Start, But Trails Equities

by Phillip Morton, Investors Offshore.com

14 February 2007

Early estimates show the HFN Hedge Fund Aggregate Average, an equal weighted average of all single manager hedge funds and CTA/managed futures products in the HedgeFund.net database, was up 1.45% in January 2007, slightly below the S&P 500 TR which was up 1.51%, HedgeFund.net has announced.

According to HFN, a division of Channel Capital Group Inc, an indication that managers may be taking a more cautionary stance entering the year is the fact that this January was the first year-opening month since 2001 in which the average hedge fund underperformed the S&P TR. The HedgeFund.net database consists of over 7,000 current hedge fund, funds of funds, and CTA products.

The HFN Emerging Markets Average was up 0.95% in January. Emerging market funds, which were the highlight of 2006, began the year with their second slowest start since 1999, a year when EM funds ended up returning 53.78%. Emerging markets were shaken by lower commodity prices early in the month, but many, like Brazil, bounced back to positive territory by the month's end, as the larger trend of continued economic strengthening remained intact.

The HFN Energy Sector Average was relatively flat, up 0.02% in January. A warm start to the winter season in the Northeast was a factor in oil prices temporarily falling below $50/barrel and lower prices hurt the long end of for managers in the strategy. In 2003, the last time the HFN Energy average began the year in, or near, negative territory, the Average finished up 21.91%.

Equity related strategies were again the driving force of positive returns, and the HFN Equity Hedge Average was up 1.86% in January. The HFN Relative Value Aggregate was up 1.50% in January, aided by continued strength from convertible arbitrage strategies. The HFN Convertible Arbitrage Average was up 1.56%, the 15th straight positive month for the strategy.

CTA/Managed Futures funds appeared to have withstood the choppy commodity markets during the month. The HFN CTA/Managed Futures Average was up 1.14% in January.

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