Hedge Funds Post Modest Losses Amongst Mixed Markets In August

by Carla Johnson, Investors Offshore.com

09 September 2008

The Greenwich Global Hedge Fund Index (GGHFI) and the Greenwich Composite Investable Index (GI2) have announced this week that they lost ground in August, posting losses of -1.18% and -1.33% each in that month alone.

In a statement released by Greenwich Alternative Investments on Tuesday, it was announced that year-to-date, the GGHFI and the GI2 have shed -4.12% and -3.13%, respectively, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have lost -11.39%, -15.35%, and -12.70%, correspondingly. 39% of constituent funds in the GGHFI ended the month with gains.

"The lack of market direction and continued uncertainty in credit markets is evident in the results of hedge funds this month. The performance of hedge funds year-to-date through August is similar to what we experienced in 2002, a year in which hedge funds ended the year virtually flat." noted Margaret Gilbert, Managing Director.

Once again, Market Neutral managers were the best performing group of hedge funds for the month, shedding an average of -0.70%. Results within the group were mixed, as Merger Arbitrage funds gained for the second month in a row while Statistical Arbitrage and Equity Market Neutral managers each lost more than 1% for the month.

Directional Trading funds experienced a modest loss of -0.74% in August but remain solidly in positive territory for the year. Funds that specialize in market timing posted the second highest gains among managers this month as they returned +1.30%. Long/Short Equity funds lost ground in August as Value managers fared better than their Growth-oriented counterparts, returning -0.45% and -2.10%, respectively.

Short Sellers were also unable to show positive gains for the month, although their strategy easily remains the highest returning subsector among Long/Short funds this year. Finally, Specialty Strategy managers continued to underperform their hedge fund peers for a third month in a row, losing -2.84% on average. Emerging Market funds once again suffered the greatest losses among all managers as a result of significant declines in BRIC indices.

The GGHFI is one of the oldest benchmarks of the hedge fund universe and currently includes 1097 constituent funds. Final index results for August will be available early September, once additional funds have submitted returns.

The GI2, comprising 46 constituent funds, adds investability, active management, and liquidity to the diversification and performance benefits of the broad Greenwich Global Hedge Fund Index. It references actual hedge fund vehicles as opposed to separately managed accounts or other methods used in an attempt to replicate the returns of hedge fund vehicles.

Finally, the Investable Index has a correlation of 0.94 and beta of 0.89 to the GGHFI and is reported semi-monthly net of a 0.02% per period index calculation fee.

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