Local hedge funds report steady returns for March

The 44 funds participating in the Nedgroup Investments Hedge Fund Review gained, on average, 2.3% after fees during March. This compares to the return of the FTSE/JSE All Share Index of 6.4% and the All Bond Index of -0.5%.

Lizelle Steyn, Product Manager at Nedgroup Investments, says the long/short equity category was the best performing category for the month, delivering 3.5% on average. The funds in the trading, market neutral and fixed interest categories, on average, achieved returns of 3.0%, 1.1% and 0.5% respectively.

For the year ended 31 March 2007, the hedge funds with long enough track records delivered 18.5%, on average. Over this period the long/short equity funds also achieved the highest returns of 30.6%, on average. The trading, market neutral and fixed interest categories followed with returns of 20.8%, 9.3% and 7.4% respectively. The fund with the highest return for the 12 months ended 31 March 2007 was the Top-Flite Eagle Fund with a return on 47.0%. In comparison, the FTSE/JSE All Share Index gained 37.6% over the period and the All Bond Index 5.6%.

Steyn said, "It is expected that hedge funds will display lower returns than the equity market over the long term, as hedge funds normally enjoy lower net effective exposure to the markets, to protect the capital of hedge fund investors. Over the past six years, for example, the Nedgroup Investments SA Hedge Fund Index has never experienced a negative 12-month period, whereas the FTSE/JSE All Share Index suffered losses over 10 rolling 12-month periods." (See graph below.)

The Nedgroup Investments SA Hedge Fund Index delivered a return of 17.7% for the year ended 31 March 2007, at a volatility of 2.9%. Since inception (1 January 2001), the Index delivered 22.9% p.a., at a volatility of 6.5%. Over the same period, the FTSE/JSE All Share Index generated slightly higher returns of 25.2% p.a., but at a much higher volatility of 18.6%. The BESA All Bond Index and the STeFI Interbank Call Rate returns for this period are 13.5% 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 0.06.