Hedge Fund Returns Continue To Climb
Thursday, May 13, 2010

Hedge funds as measured by the Greenwich Global Hedge Fund Index (GGHFI) continued their upward climb in April as all Greenwich hedge fund strategy groups advanced during the month.

The GGHFI gained 1.08% compared to global equity returns in the S&P 500 Total Return (+1.58%), MSCI World Equity (-0.16%), and FTSE 100 (-2.22%) equity indices. 71% of constituent funds in the GGHFI ended the month with gains.

“Strong first quarter earnings and stable credit markets propelled hedge funds to their third positive month in a row for 2010,” said Tom Whelan, President & CEO. “April's performance established a new all time high for the Greenwich Global Hedge Fund Index, erasing the effects of the financial crisis.”

According to Greenwich:

The Market Neutral Group led the way in April, returning +1.23%. All sub-strategies in this group saw gains for the month. Managers employing Event-Driven strategies were particularly strong, gaining 1.99% in April, with major contributions from Distressed Securities (+2.73%) and Several Strategies (+2.56%). Merger Arbitrage funds saw a more modest rise of 10 basis points. Equity Market Neutral managers rose 29 basis points for their fifth straight month of gains. Arbitrage strategies were up 1.30% for the month, as the Greenwich Convertible Arbitrage Index returned an impressive 3.02%, making it the strongest performing hedge fund strategy in April.

Specialty Strategies came in just behind the Market Neutral Group, gaining 1.19% in April. Long-Short Credit maintained its winning streak, returning another month of gains in April with a rise of 1.54%, bringing it to 5.35% for the year. Multi-Strategy funds were also positive, moving forward 90 basis points during the month.

Even as equity markets began to take a downturn at month end in April, Long-Short Equity managers brought in another month of positive returns with a gain of +1.12%. Value focused managers were the best performers of the group (+1.39%), followed by Growth (+1.02%) and Opportunistic (+0.86%) managers. Conversely, Short-Biased managers lost a modest 56 basis points in April.

Directional Trading funds moved forward another 0.89% in April, following an especially strong month in March. Even as the group lagged the GGHFI, the Greenwich Managed Futures Index moved up 96 basis points, followed by an upward move of 71 basis points for the Greenwich Macro Index.

On a regional level, hedge funds investing in North America and Asia continued to be the strongest performers of 2010 in Developed Markets, gaining 1.81% and 1.71% respectively. Meanwhile, fears of debt contagion in Europe lingered, and managers investing in this market were the weakest performers on the month, with a still positive return of +0.26%. Overall, the Developed Markets Composite index pushed up 1.10%.

The Greenwich Emerging Markets Composite Index slightly lagged its Developed Markets counterpart with a return of +0.86%, perhaps marking the beginning of a shift in the dynamic that had favored Emerging Markets. Funds investing Globally in Emerging Markets came in with the best return for the month in this group (+1.82%), followed by Asia (+1.25%). After a spectacular rise of 8.85% in March, Emerging Markets Europe came back down to earth in April with a modest gain of 0.66%. The Index was dragged down by a loss of 1.44% in Latin America.