Steady 1st quarter for local hedge funds

The most recent performance of the Blue Ink All South African Hedge Fund Composite (BIC),which tracks the average return of all single strategy local hedge funds, shows that hedge funds reported an average return of 3.01% over the first quarter of 2012.

Long Short hedge funds on average returned 5.45% over the period, while Equity Market Neutral funds reported an average gain of 1.43%. Fixed Income Arbitrage hedge funds on average reported an increase of 2.63%.

For the 12 months to March 2012, hedge funds on average reported a 10.5% increase in return, outperforming the All Share Index by more than 3%.

According to Grant Hogan, Research Analyst at Blue Ink Investments, notably, this outperformance was achieved with much less volatility. “The standard deviation (volatility) on the All Share Index over the last 12 months was over 13%, compared to just over 2% for hedge funds.”

He says that notwithstanding the volatility observed in capital markets, hedge funds have managed to delivered positive real returns over a very difficult twelve month period.

“Hedge fund portfolios typically are aligned with the prevailing risk-return profile of the market, knowing that there will be many attractive periods in which to accept market risk and that these periods have historically provided more than enough opportunity to capture strong returns with subdued risk. The BIC shows clear evidence of this.”