S&P Announces Better Hedge Fund Performance In February

by Carla Johnson, Investors Offshore.com

14 March 2005

Standard & Poor's announced that hedge fund performance as measured by the S&P Hedge Fund Index finished the month of February up 0.83% to produce a positive year-to- date return of 0.36% for the index. Also recovering from a slow start to the year were the S&P Directional/Tactical and S&P Event-Driven Indices, returning 0.67% and 1.53% respectively for the month. The S&P Arbitrage Index also ended February on a positive note, returning 0.29% during the month.

The S&P Equity Long/Short Index moved up 1.80% during the month, while the S&P Managed Futures Index ended the month in slightly negative territory, down 0.14%. The S&P Arbitrage Index gained 0.29% during February, bringing its year-to-date return to 0.60%.

"The month of February witnessed a continued recovery in the Equity Market Neutral strategy, particularly in Europe," says Charles Davidson, Senior Hedge Fund Specialist at Standard & Poor's. "Many Convertible Arbitrage managers continue to find difficulties in this low volatility environment resulting in small increases in leverage. Results in fixed income were mixed with yield curve traders outperforming those in the mortgage-backed space."

The S&P Event-Driven Index gain of 1.53% for the month has resulted in the second best, year-to-date return (+1.47%) among the S&P Hedge Fund Indices. Distressed and Special Situations registered a strong month as upward movement in oil prices had a strong positive impact on many of their natural resource holdings. "Merger Arbitrage managers are finally starting to see opportunities in what has become an increasingly favorable environment," adds Davidson. "The positive tone in M&A activity is reflected in the upward price moves on acquirers' stocks after announcements."

Standard & Poor's offers a growing family of hedge fund indices. The main S&P Hedge Fund Index offers an investable benchmark that is representative of the broad range of major strategies that hedge funds employ. The index currently has 41 constituents grouped into three sub-indices: S&P Arbitrage Index, S&P Event-Driven Index and S&P Directional/Tactical Index, which in turn represent a total of nine specific strategies. These strategies include: Equity Market Neutral, Fixed Income Arbitrage, Convertible Arbitrage, Merger Arbitrage, Distressed, Special Situations, Equity Long/Short, Managed Futures and Macro.

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