MSCI Publishes April Hedge Fund Indices Performance

by Caral Johnson, Investors Offshore.com

03 June 2003

The MSCI Hedge Fund Composite Index, an equal weighted index, posted a 1.94% return for the month of April, surpassing March’s 0.41%. In comparison, the MSCI World Equity Index rose 8.64% in April.

The MSCI Sovereign Debt Index returned 1.23% for the month of April while LIBOR returned 0.11%. Over the past year, the MSCI Hedge Fund Composite Index gained 6.28% outperforming the MSCI World Equity Index, which returned -16.00%, but underperforming the MSCI Sovereign Debt Index, which gained 22.45%.

The best performing process group for April was Specialist Credit which gained 2.66%. Specialist Credit funds seek to lend to credit-sensitive issuers. The biggest contributor to the performance of Specialist Credit was Distressed Securities which gained 4.00%. Security Selection gained 2.60% for the month of April. Security Selection managers combine long positions and short sales with the aim of benefiting from their ability in selecting investments while offsetting systematic market risks. Within Security Selection, Long Bias was the best performer posting a 3.95% gain followed by Variable Bias with a 1.21% gain and No Bias with a 0.60% gain.

Directional Trading gained a modest 1.21% in April, but remains one of the best performing process groups on a year-to-date basis with a 5.06% return, and for the past year with a 22.53% return. Directional Trading strategies are based on anticipating the direction of market prices of currencies, commodities, equities, and bonds in the futures and cash markets. A 1.27% increase by Systematic Traders contributed to the Directional Trading Group’s performance in April.

Relative Value funds continued to perform modestly gaining 0.94% in April driven by a 1.33% return from Arbitrage, and more specifically, Convertible Arbitrage with a 1.63% return. Relative Value strategies focus on spread relationships between pricing components of financial assets or commodities.

The best performing asset class index in April was the MSCI Hedge Fund Fixed Income Index which gained 2.22%. The MSCI Hedge Fund Equity Index gained 2.15%, while the MSCI Hedge Fund Diversified Index only gained 1.35%.

By geography, funds focusing on Europe seem to be the best performing group with a 2.71% US dollar gain in April. In Euros, the return was only 0.42%. Hedge funds investing in North American markets gained 2.11%, while funds investing in Japan gained 0.01%. The Yen return of funds investing in Japan was 0.58%.

The MSCI Hedge Fund Indices are composed of more than 160 indices. More than 1,700 hedge funds have agreed to participate in the database and there are over 1,400 hedge funds currently in the MSCI Hedge Fund Indices and Database.

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