Hedge Funds End 2005 On High Note

by Phillip Morton, Investors Offshore.com

12 January 2006

Data released this week by The Barclay Group has revealed that hedge funds concluded 2005 on a high note by gaining 2.37% on average during the month of December.

“As a group, directional hedge funds did well in December and had an excellent 2005,” observed Sol Waksman, founder and president of The Barclay Group.

Hedge funds gained on average 10.88% last year according to Barclay.

For December, Barclay’s Pacific Rim Equities Index gained 5.40% and Barclay’s Emerging Markets Index was up 3.18%.

For 2005, Emerging Markets led Barclay’s 18 hedge fund indices with an annual gain of 21.35 percent, closely followed by Pacific Rim Equities at 20.36 percent.

“Equity markets outside the U.S had a good year in 2005,” announced Waksman.

“Given all the bad press focused on relatively low returns for fund of funds investors, it wouldn’t be surprising if portfolio managers took on a bit more risk in the coming year in order to increase returns," he added.

“Historically, diversified Fund of Funds managers have tended to be risk averse. Their portfolios have been over-weighted in arbitrage strategies and under-weighted in directional strategies. We may well see some rebalancing in 2006," Waksman noted.

Only one of Barclay’s 18 hedge fund indices lost money in 2005. The Convertible Arbitrage Index was down 3.83 percent for the year.

The Barclay Group, founded in 1985, actively tracks more than 5,100 hedge funds and managed futures programs.

Barclay has created and regularly updates 18 proprietary hedge fund indices and eight managed futures indices.

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