Hedge Funds Underperformed S&P 500 in March

by Phillip Morton, Investors Offshore

25 April 2003

On average, hedge funds underperformed the S&P 500 through March 2003 according to results published by HedgeFund.net.

The results are based on a group of 1,140 funds that have reported results for March. It shows the average gain was 0.04% compared to a 1% gain in the benchmark S&P 500 index in the same month. The average equity based mutual fund by comparison returned average gains of 0.3%. The top 25% of these hedge funds managed to return gains of 1.17% on average whilst the bottom 25% lost 0.60%.

However, when compared against the S&P 500 in the year up to March, hedge funds fared significantly better. During this time the index lost 3.1% of its value, whilst the average equity mutual fund lost 3.7%. The year to date average gain for hedge funds was 1.64%, with the top 25% returning 3.49%. The lower 25% of performers lost 0.54% during this period.

Quite significantly, the results also revealed good performances from the technology and value sector funds which witnessed their strongest gains since November last year on the back of firmer market conditions. The top 10% of technology funds posted solid gains of 3.88% on average, with the 10% of value funds returning average gains of 3.60%.

Amongst the best performers were convertible arbitrage and distressed funds. The average convertible arbitrage fund posted gains of 5.27% in the previous year, while the average distressed fund experienced an average return of 5.9% last month.

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