'Alternative Alternatives' Index Declines
Tuesday, May 10, 2011

Opalesque Ltd., a leading provider of online information services to the alternative investment industry, announced recently the results of the Opalesque A SQUARE ('alternative-alternatives') indices covering the performance of niche alternative investment funds, which declined by 0.14% for the month of March.

The indices are calculated based on the net performance of 605 single- and multi-manager funds currently listed in 22 categories in Opalesque Solutions. Opalesque announced on May 3 that the A SQUARE Fund Database and March's decline comes after an estimated gain of 0.8% through February, bringing the year-to-date performance to 0.66%. The A SQUARE Funds of Funds Index performed almost flat in March with a loss of 0.08% after gaining an estimated 0.94% through February. Year-to-date, the index gained 0.86%.

Over the last 12 months, performance of the A SQUARE Index ranged between a gain of 3.12% in September 2010 and a loss of 1.97% in May 2010, with nine positive and three negative months. Opalesque noted that in a difficult month affected by political unrest in the Middle East and North Africa region and the Japan quake, "Alternative Alternatives" funds performed similarly to hedge funds: the HFRI Fund Weighted Composite Index returned 0.01% in March (+9.98% over the last 12 months). The MSCI World Index, however, posted a loss of 1.24% in March (+12.34% over the last 12 months).

In terms of absolute and relative risk, both the A SQUARE Index and the A SQUARE Funds of Funds Index did better than their benchmarks over the analyzed 12-month period: volatility (defined as annualized standard deviation) was 5.05% for the A SQUARE Index and 5.21% for the FoF Index, compared to 6.18% for the HFRI and over 19.54% for the MSCI World. The maximum drawdowns in the last 12 months were 2.35% for the A SQUARE Index and 3.12% for the A SQUARE Funds of Funds Index, compared to 3.84% for the HFRI and 13.7% for the MSCI World.

According to Opalesque, historically, the A SQUARE single manager funds delivered steady, double-digit returns from 2004 to 2010 (with the exception of the financial crisis year 2008), ranging between 10.94% in 2010 and 14.85% in 2005, and outperforming the HFRI Fund Weighted Composite Index four times. During the crisis year of 2008, the A SQUARE Index provided significant downside protection, ending the year 2008 down 5.87%, compared to a HFRI decline of around 20%.