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Alternative Market Briefing

Protecting the downside major driver of hedge fund outperformance (+88%) against equities (-23.33%) over past ten years - Hennessee

Wednesday, January 20, 2010

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From Kirsten Bischoff, Opalesque New York:

A ten-year overview of hedge fund performance makes the case for increased exposure to the alternative investment vehicles. With the Hennessee Hedge Fund Index outperforming the major equities indices by a whopping +111% (+88% for the Hennessee Hedge Fund Index vs. -23.33% for the S&P 500, -9.30% for he DJIA and -44.24% for the NASDAQ Composite Index) over the ten-year period ending December 2009, hedge fund managers enter 2010 with a strong asset-raising story to present to investors.

Alpha generation through capital preservation a big driver of outperformance 'Alpha generation' may be the current buzz phrase favored by hedge fund marketers, however the focus is typically on alpha generated during rising markets. The ten-year performance overview shows that the long-term success of hedge funds is also largely driven by alpha generated through minimizing downside risk.

"Unlike mutual fund managers, hedge fund managers typically have wide discretion over asset mix and stance towards the market, and they are paid to add value accordingly."Paul Compton, Head of Product Management, hedge fund technology provider SunGard Alternative Investments told Opalesque. "Bull markets are easier markets" most hedge funds are net-lon......................

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