Some follow up to yesterday’s Hedge fund discussion:
We start out noting Barron’s comparison between S&P500 and Hedge Fund Performance:
click for larger chart
"[f]unds’ current popularity was fueled by a good run after 1998, an annus miserabilis in hedge-fund history. That year, as the S&P 500 leaped 28.60%, the CSFB/Tremont Index fell 0.36%.
But in ’99, the hedge-fund index was up 23.43%, while the S&P rose 21.04%. The index climbed 4.85% in 2000, 4.42% in 2001 and 3.04% in 2002 — years in which the S&P fell 9.10%, 11.90% and 22.10%, respectively.
The strong performance in the 2000- 2002 bear market turned out to be a great selling point, especially as institutional investors began looking for alternative assets that didn’t correlate as much with stocks and bonds. Soon, a tidal wave of cash cascaded into hedge funds. Net inflows hit $72 billion in 2003 and $123 billion last year, says Tremont Capital Management. Indeed, perhaps nothing would help the industry more than another bear market.
In this year’s first quarter, HFR estimates that inflows rose to $27.4 billion, producing a growth rate of 23% — nice, but way below the 180%-plus seen a year earlier. Tremont, however, estimates that inflows actually fell by $13 billion. (The reason for the wide disparity in estimates is unclear, although the firms’ data, to some extent, may cover different funds.)
Many in the industry blame hedge fund’s less-than-stellar investment performance in the past 18 months on the paucity (at least until recently) of volatility and strong market trends — crucial elements for generating gains. "In a low-volatility environment, even the smartest investors have problems making money," observes Jan Loeys, a JP Morgan strategist who has analyzed the industry. Among the big-name firms that have been struggling is John W. Henry, which trades managed futures. Its Global Finance and Energy Portfolio was down an estimated 27% in this year’s first four months."
Next, we get into the detains of those numbers, along with an interesting analysis of Hedge fund performance, from CogentHedge.com:
click for larger chart
At the Cogent fund site, this chart is dynamic — each category can generate another chart of all the subspecialties with each fund style.
Cogent Dynamic Averages
For Hedge Funds, Is the Party Over?
Lawrence C. Strauss
Barron’S, Monday, May 30, 2005
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