S&P Hedge Fund Index Down 0.47% In January

by Phillip Morton, Investors Offshore.com

11 February 2005

Standard & Poor’s followed in the footsteps of other major hedge fund indices this week by reporting a 0.47% decline in the S&P Hedge Fund Index in January.

In a statement, S&P explained that after ending 2004 on a high note with a gain of 1.23% in December, performance was dragged down last month by losses in the Directional/Tactical and Event-Driven Indices.

According to S&P, its Directional/Tactical Index declined by 1.66% in January as all three of its underlying strategies, which include Managed Futures, Equity Long/Short and Macro, experienced varying degrees of negative returns.

Currency positions accounted for the majority of losses among trend followers and discretionary global macro investors, while reversals in the energy and metals markets from their recent highs exacerbated losses, particularly in Managed Futures.

“These sharp reversals, caused in part by uncertainty leading up to the Iraqi elections, were particularly difficult for many Managed Futures programs as these positions, young in existence, were quickly liquidated at stops placed outside the market,” explains Justin Dew, Senior Hedge Fund Specialist at Standard & Poor’s.

Weak equity markets in January also affected fund managers, especially those with a long equity bias, contributing to the negative performance, and S&P reported a loss of 0.18% in the Equity Long/Short Index, resulting from a “a very difficult US equity environment.”

Meanwhile, The S&P Arbitrage Index gained 0.31% on the month resulting from gains in two of its three underlying strategies, in particular Equity Market Neutral and Fixed Income Arbitrage, while the S&P Event-Driven Index was largely flat for the month, down 0.06%.

Recommended