Hedge Funds Have Best April Since 1999

by Carla Johnson, Investors Offshore.com

10 May 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 2.61% in April 2007.

This was the best April hedge funds have experienced since 1999, a year when the HFN Aggregate Average increased over 30%. Returns were below the S&P 500 Total Return which increased 4.43% during the month, but for the year hedge funds are still outperforming as the HFN Aggregate is up 5.25% while the S&P 500TR is up 5.10%. The HedgeFund.net database consists of over 7,200 current hedge fund, fund of funds, and CTA products.

HFN said that returns were driven by strong global equity markets, despite worries over a deteriorating sub-prime housing market in the US and as a result, strategies which are historically long biased in equity securities performed best. The HFN Long Only Average was up 5.33% in April and is up 10.30% YTD and the HFN Small/Micro Cap Average was up 3.18% in April and up 8.31% YTD. Perhaps a sign that long/short managers are becoming more defensive, the HFN Long/Short Equity Average was up 2.46% in April leaving it up 5.80% YTD. Long/Short managers tend to outperform the broad hedge fund average when equity markets are strong as they were in April.

Emerging markets turned in a blowout month in April as several EM equity markets reached all time highs. The HFN Emerging Markets Average was up 3.58% in April and up 7.66% YTD. Markets in Brazil surged as the central bank lowered interest rates 25 basis points. The newly formed HFN Latin America Average was up 4.37% in April and up 10.95% YTD.

Other strategies which had strong months include: the HFN Energy Sector Average, up 3.55% in April and up 7.40% YTD, the HFN Multi-Strategy Average, up 4.20% in April and up 7.80% YTD, and the HFN Event Driven Average, up 3.18% in April and up 8.49% YTD. Short biased strategies were the only negative broad hedge fund category and the HFN Short Bias Average was down 3.21% in April and down 3.37% YTD.

In a month where directional equity is dominant, arbitrage strategies tend to under perform and April was no exception. The HFN Fixed Income Arbitrage Average was up 0.42% in April and up 2.56% YTD, the HFN Convertible Arbitrage Average had its worst month since the end of 2005, up 0.26% in April and up 3.11% YTD, and the HFN Capital Structure Arbitrage Average was up 1.21% in April and up 3.61% YTD.

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