Local hedge funds deliver strong performance despite the collapse of Evercrest

April was another good month for funds submitting data to the Nedgroup Investments Hedge Fund Review, reports Lizelle Steyn, Product Manager at Nedgroup Investments and compiler of the monthly Review.

"The 47 funds participating in the Review gained, on average, 2.6% after fees during April. The long/short equity category was the best performing category for the month, delivering 4.2% on  average. The funds in the fixed interest, market neutral and trading categories, on average, achieved returns of 1.0%, 0.4% and 3.8% respectively.
 
"For the 12 months ended April 2007, the hedge funds with long enough track records delivered 20.2%, on average. Over this period the long/short equity funds also achieved the highest returns of 34.1%, on average. The fixed interest, market neutral and trading categories followed with returns of 8.4%, 8.7% and 23.2% respectively. The fund with the highest return for the 12 months ended April 2007 was the 36ONE Hedge Fund with 50.7%. By comparison, the FTSE/JSE All Share and the All Bond Indices returned 36.7% and 6.0% respectively over the same period."

The above figures reveal little of the misfortune experienced by some hedge fund investors last month, as the first hedge fund blow up eventually hit the local industry. The Evercrest Aggressive Fund lost 66% during April on an allegedly leveraged short position against Sanlam.

Steyn points out that this fund was not submitting data to the Nedgroup Investments Hedge Fund Review, where the worst-case scenario so far has been when the late Pine Valley Fund lost 12% from its peak in July 2003 until its closure 14 months later. "However, the Review does not endorse the funds from which it receives data and, as with the purchase of any investment product, caveat emptor prevails," Steyn concludes.