Category Investments

Hedge funds 'smooth out' market volatility over past five years

01 February 2007 Nedgroup Investments / Meropa Communications

The latest Nedgroup Investments Hedge Fund Review reveals that the participating funds with track records longer than 12 months delivered an average return of 19.9% for the year ending December 2006.

Lizelle Steyn, Manager Alternative Products at Nedgroup Investmens, says the 10 funds in the long/short equity category with a long enough track record, on average, achieved returns of 31.4% for the calendar year. The fixed interest, market neutral and trading categories followed with returns of 7.8%, 11.3% and 23.7% respectively.

In the month of December the 40 participating funds gained, on average, 2.3% after fees. In this month the long/short equity category was again the best performer, delivering 3.5% on average. The funds in the fixed interest, market neutral and trading categories, on average, achieved returns of 1.1%, 1.0% and 2.8% respectively.

The Nedgroup Investments SA Hedge Fund Index delivered a return of 19.2% for the year ended December 2006 at a volatility of 4.4%. The Index geometrically links the monthly returns of all funds submitting data during each month of the Reviews existence. It therefore includes funds with track records shorter than one year and those that have closed down or ceased contributing returns during the past six years. The Index is calculated in such a way as to minimise survivorship and self selection bias. Steyn points out that since inception on 1 January 2001, the Index delivered 22.8% p.a. at a volatility of 6.7% p.a. Over the same five year period the FTSE/JSE All Share Index generated slightly higher returns of 24.3% p.a. but at a much higher volatility of 18.9% p.a. The BESA All Bond Index and the STeFI Interbank Call Rate returns for this period are 13.8% and 9% respectively, at annualised volatility levels of 6.7% and 0.7%.

The Nedgroup Investments SA Hedge Fund Index displayed very little correlation with the FTSE/JSE All Share Index over the five year period at 0.06.


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