Hedge Fund Returns Rebound
Thursday, April 01, 2010

The Greenwich Composite Investable Hedge Fund Index moved higher during the month of February to enter positive territory for 2010.

With the exception of the Macro Investable Index, all Greenwich Investable Indices advanced for the month and seven of nine are now positive on the year, Greenwich Alternative Investments has announced.

The Composite Index (Monthly Liquidity) returned 0.53% compared to a gain of 1.23% for the MSCI World Equity Index in February.  The Investable Futures Index led gains during the month, moving up 1.09%.  Year-to-date, the Event-Driven and Long-Short Credit Investable Indices have been the best performers with gains of 2.42% and 1.74%, respectively.

“We have been pleased with the ability of fund managers to actively manage risk during the first quarter of 2010," noted Clint Binkley, Senior Vice President at Greenwich. "The majority of portfolio managers were able to minimize drawdowns in January while still positioning their funds to capture market moves to the upside in February.  We expect most hedge fund strategies to outperform global equity markets in 2010 if the volatility experienced during the first quarter continues."

Meanwhile, the Greenwich Global Hedge Fund Index gained 0.68% during the month, recouping most of its January loss. Almost all hedge fund strategies traded higher during the month. The best performers were Long-Short Equity Funds who increased net exposures in the latter half of the month. Laggards on the month were Long-Short Credit funds and funds investing in distressed securities.

Long-Short Equity managers were some of the best performing hedge funds in February, as the Greenwich Long-Short Equity Index advanced by 0.90%. According to Greenwich's strategy review for the month of February, most funds increased their exposure during the latter half of the month but remained cautious, expecting continued market volatility. Managers on average consider developed markets a better risk/reward opportunity when compared with emerging markets as many see the problems in Greece as being far from resolved, the review notes. Nearly two-thirds of managers in the Greenwich Long/Short Equity Index finished the month with gains. Only 30% of short-biased funds were able to move higher on the month as managers lost 1.23% in February.

Long equity holdings in the technology, commodity, consumer discretionary, and industrial sectors were major contributors for many funds in February while energy names were detractors, says the review.

Managed Futures funds rebounded in February after a weak start in January as commodities rallied in the latter part of the month. The Greenwich Managed Futures Index advanced 0.40% while 60% of managers finished the month with gains.

Event-Driven funds showed mixed results in February as funds gained 44 bps on average. Merger Arbitrage funds had an excellent month, gaining 0.96% as 94% of managers reported gains. Equity Market Neutral funds exhibited excellent results during February, advancing by 0.95% on average – the best monthly performance for the Equity Market Neutral Index since May 2009. Convertible Arbitrage managers recorded a modest gain in February, advancing 0.20%. Fixed Income Arbitrage funds were only slightly higher in February (up 0.17%), despite 88% of managers reporting positive returns for the month. The Greenwich Global Macro Index advanced by 1.34% in February.