Hedge funds hold their own in first half of 2007

The Nedgroup Investments Hedge Fund Index delivered a respectable 11.0% for the first half of 2007, against the FTSE/JSE All Share Indexs return of 15.1% and the -0.1% of the BESA All Bond Index, reports Lizelle Steyn, Product Manager at Nedgroup Investments.

The Nedgroup Investments Hedge Fund Index delivered a return of 21.1% for the year ended June 2007 at a volatility of 2.8%. Since inception (1 January 2001, see graph on following page), the Index delivered 22.8% pa at a volatility of 6.4%. Over the same period, the FTSE/JSE All Share Index generated a slightly higher return of 24.9% pa but at a much higher volatility of 18.3%. The BESA All Bond Index and the STeFI Interbank Call Rate annual returns for this period are 12.7% and 9.0% respectively, at annualised volatility levels of 6.6% and 0.7%. The Nedgroup Investments SA Hedge Fund Index displayed very little correlation with the FTSE/JSE All Share Index over this period, at 0.07.

Turning to the Nedgroup Investments Hedge Fund Review, the funds participating in the Review gained, on average, 0.4% after fees during June. In comparison, the FTSE/JSE All Share Index had a negative return of 1%, and the All Bond Index lost 2.1%, but the STeFI Interbank Call Rate returned a positive 0.7%.

The fixed interest category was the best performing category for the month, delivering 2.0% on average. However, there are only two funds in this category, so the results are heavily skewed by the return of 3.8% delivered by the South Easter Fixed Interest Fund. The funds in the long/short equity, market neutral and trading categories, on average, achieved returns of -0.3%, 1.4% and -0.3% respectively.

For the 12 months ended June 2007, the hedge funds with long enough track records delivered 22.8% on average. Over this period the long/short equity funds achieved the highest returns of 42.9% on average. The fixed interest, market neutral and trading categories delivered returns of 13.8%, 10.6% and 13.6% respectively. The fund with the highest return for the 12 months ended June 2007 was Investec Securities IEB High Growth Portfolio, with a return of 91.5%. By comparison, the FTSE/JSE All Share and the All Bond Indices returned 36.9% and 7.7% respectively over the same period.