Van Global Hedge Fund Index Rises
Van Hedge Fund Advisors International, LLC (VAN)
Courtesy the Hedge Fund Association
Van Global Hedge Fund Index Rises 0.1% In March (2004)
Hedge Funds Preserve Capital as Stock Market Retreats
The Van Global Hedge Fund Index gained 0.1% net last month according to industry consultant Van Hedge Fund Advisors International, LLC (VAN). The Index provides a broad indication of hedge fund and fund of fund performance, net of fees. The March Index return is based on the performance of over 800 funds from around the world, employing a range of investment strategies. A majority of funds, 58%, posted a positive return for the month.
Excluding funds of funds, the Index also returned 0.1% net for March. The Van U.S. Hedge Fund Index, which includes only U.S.-domiciled funds, was flat for the month, while the Van Offshore Hedge Fund Index, which includes non-U.S.-domiciled funds, gained 0.3% net. Final index results will be released at the end of the month, after additional hedge funds have reported their returns to VAN.
Hedge Funds vs. the Markets
March hedge fund performance compares favorably with the stock market, as the S&P 500, NASDAQ and Dow Jones Industrial Average saw losses of -1.5%, -1.7%, and -2.0%, respectively, last month. Fixed income investments fared better, as the Average Taxable Bond Mutual Fund gained 0.6% in March. Hedge funds invest in a variety of asset classes, although equities are the most common.
For the year to date, the Van Global Hedge Fund Index has risen 3.1% net of fees, its most successful first quarter since 2000. In comparison, the S&P 500 has returned 1.7% for the year to date, while the NASDAQ and Dow have each lost -0.4%. The Average Taxable Bond Mutual Fund has gained 2.0%.
One of the main reasons that sophisticated investors have turned to hedge funds is their ability to protect capital even as the broad market falters. March marked the thirteenth month in the last five years that the S&P 500 has been negative but the Van Global Hedge Fund Index has been positive. The S&P 500 had a total return of -5.9% during that five-year period while the Van Index gained 87.5% net.
Performance by Strategy Group
Performance was generally even among the major Global hedge fund strategy groups. The Market Neutral Group performed best with a 0.3% net return while the Directional Trading Group and Specialty Strategies Group each returned 0.2% net. The Long/Short Equity Group was flat for the month.
For the first quarter, the Directional Trading Group yielded the best results, gaining 4.9% net, while the Market Neutral Group fared the worst of the four with a 2.7% net gain.
Performance by Individual Strategy
Among the individual strategies tracked by VAN, Emerging Markets had the highest March return, 0.8% net.
That strategy has performed particularly well in recent months and was the second-best performing strategy during the first quarter with a 6.4% net return. The top performing strategy for the quarter was Futures; that strategy gained 0.4% net last month and 8.1% net for the quarter. While nine of the fifteen individual strategies tracked by Van were positive in March, five showed losses, including Short Selling, which posted the lowest March return, -1.1% net.
Short Selling was the only strategy with a negative return for the year to date, losing -2.5% net in the first quarter.
Among the arbitrage sub-strategies tracked by Van, Convertible Arbitrage gained 0.8% net in March, Statistical Arbitrage rose 0.5% net, Fixed Income Arbitrage returned 0.1% net, and Merger Arbitrage was flat for the month.
March Index Value
The Van Global Hedge Fund Index climbed to a value of 10,972.02 in March. The Index began with a value of 1,000 in January 1988. Over its 16 year and three month history, the Index has generated a net compound annualized return of 15.9%, compared to a 12.4% compound annualized return for the S&P 500. Past performance of the Van Global Hedge Fund Index may be viewed at www.hedgefund.com.
Final March returns for the Van Hedge Fund Indices will be calculated at the end of April, after several hundred more funds have submitted their returns to VAN. Those results will supercede the returns reported herein, should they differ. Final March returns for the Van Hedge Fund Indices will be posted at www.hedgefund.com when they become available.
Entry Filed under: Hedge Fund Strategy