Solid gains for Hedge funds reported over past ten months

The 38 local hedge funds participating in the Nedgroup Investments Hedge Fund Review gained, on average, 2.2% after fees in October, compared to the 4.6% of the FTSE/JSE Africa All Share Index. The BESA All Bond Index gained 3.1% over the same period, and the SteFI Interbank Call rate was 0.6%.

Lizelle Steyn, manager of alternative investments at Nedgroup Investments, says a lower than expected interest rate hike was one of the major factors that buoyed the equity market.

She says the best performing hedge fund category for the month was long/short equity, which delivered 3.6% on average. The funds in the market neutral, trading and fixed interest categories, on average, achieved returns of 1.7%, 1.3% and 0.9% respectively.

"Our analysis shows that for the year to end October 2006, hedge funds delivered a return of 15.0%, on average, compared to the 32.1% return of the FTSE/JSE Africa All Share Index and 3% return of the BESA All Bond Index. Over this period the long/short equity funds also achieved the highest returns of 20.6%, on average."

"This is not surprising in light of the continuation of the bull market trend over the last 10 months, and the fact that long/short equity funds normally enjoy the highest exposure to the equity market of all the categories, with the exception of the trading category from time to time. The trading, market neutral and fixed interest categories followed with returns of 18.0%, 9.7% and 5.3% respectively. The fund with the highest return for the year to end October 2006 was DWT Securities Badger Quant Strategy Fund with 37.3%," concludes Steyn.