Sat, Dec 20, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Hedge fund asset flows favor equity strategies (Europe and US) - Morningstar

Monday, April 25, 2011
Morningstar, Inc. (NASDAQ: MORN), a provider of independent investment research, reported preliminary hedge fund performance for March 2011 as well as asset flows through February. The Morningstar 1000 Hedge Fund Index, a composite of the largest hedge funds in Morningstar's database, rose 0.1% for the month, while the currency-hedged Morningstar MSCI Hedge Fund Index declined 0.4%. Overall, most hedge fund strategies slightly outperformed the S&P 500 Index in March, which was virtually flat at 0.04%.

The economic shock to Japan following the country's earthquake, tsunami, and ensuing nuclear crisis affected many hedge funds in March, particularly those in the Morningstar Developed Asia Equity and the Morningstar MSCI Japan Hedge Fund Indexes, which fell 0.3% and 2.3%, respectively. Although the events in Japan reverberated across the globe and caused stock market volatility to spike to its highest level in nine months, recovery came quickly, and the Morningstar Global Equity Hedge Fund Index ended the month up 1.2%.

"A sharp increase in volatility and continued geopolitical unrest threatened to stunt hedge fund performance in March, but most strategies finished the month positive with strong overall first-quarter gains," said Mallory Horejs, alternative investment analyst for Morningstar.

All other equity strategies continued to climb higher in March. The Morningstar Emerging Markets Equity and the currency-hedged Morningstar MSCI Emerging Markets Hedge Fund Indexes, which rose 1.4% and 2.4%, respectively, saw the strongest growth. March performance for these hedge fund indexes trailed that of the MSCI Emerging Market Equity Index, but it pulled both indexes into positive territory for the quarter. The two emerging market hedge fund indexes finished the quarter up 1.2% and 0.7%, respectively.

European stock markets stayed strong throughout the quarter, despite the ongoing sovereign debt crisis in Ireland, Portugal, and Greece. Accordingly, the Morningstar Europe Equity Hedge Fund Index increased 1.3% in March and 4.4% for the quarter. U.S. stocks, however, lost momentum in March in light of rising uncertainty regarding monetary policy, a discouraging slump in housing starts, and a peak in oil prices. Nonetheless, the Morningstar U.S. Equity and Morningstar U.S. Small Cap Equity Hedge Fund Indexes still enjoyed modest monthly increases of 0.2% and 0.5%, respectively. The Morningstar U.S. Small Cap Equity Hedge Fund Index outpaced all other hedge fund indexes in the first quarter, rising 4.8%.

Despite resilience across equity markets, macro-economic hedge fund strategies failed to deliver in March. The Morningstar Global Non-Trend Hedge Fund Index decreased 1.7% this month, erasing February's jump, and placing the index last with a 1.9% quarterly decline. Morningstar's Global Trend Hedge Fund Index, which includes funds that trade futures primarily according to momentum strategies, did not fare much better. It declined 1.3% in March but managed to end the quarter in the black, at 0.4%.

Relative-value strategies delivered their fourth consecutive month of positive returns in March, as the Morningstar Convertible Arbitrage, Morningstar Debt Arbitrage, and Morningstar Equity Arbitrage Hedge Fund Indexes advanced 0.9%, 0.6%, and 0.8%, respectively. The Morningstar MSCI Merger Arbitrage and the Morningstar Corporate Actions Hedge Fund Indexes, which increased 1.9% and 3.4% during the first quarter, respectively, benefited from a surge in worldwide M&A activity, which reached its highest levels since 2008.

Flows into hedge funds also reached recent highs. Hedge funds in Morningstar's database netted $5.2 billion of inflows in February, the largest monthly inflow figure since August 2009. Almost all categories gained assets, although the bulk went to funds in Morningstar's European equity ($872 million), U.S. equity ($1.1 billion), and global trend ($1.6 billion) hedge fund categories. Emerging market equity and global non-trend were the only hedge fund categories to leak assets in February, as investors reacted to increased geopolitical unrest, particularly across North Africa and the Middle East.

Funds of hedge funds in Morningstar's database also saw inflows in February of $669 million, following five consecutive months of sizeable outflows. The Morningstar Hedge Fund of Funds Index slightly outperformed the overall hedge fund index in the month of March, with a 0.3% rise, but the average hedge fund of funds underperformed both the overall hedge fund index as well as the average multi-strategy hedge fund during the first quarter of 2011.

March returns for the Morningstar Hedge Fund Indexes and the Morningstar MSCI Hedge Fund Indexes are based on funds that reported as of April 18, 2011. February asset flows are based on funds that reported as of April 14, 2011. Hedge fund investors, managers, consultants, and advisors can access additional information through the Morningstar® Alternative Investment Center(SM), formerly Morningstar® Altvest(SM), the company's research platform designed specifically for hedge funds, or Morningstar Direct(SM), the company's global research platform for institutions.

(press release)

Corporate website

kb

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Investing - Big hedge funds win again on PetSmart, Riverbed, RBS sells real estate loans to hedge fund Cerberus, Talisman energy speculation: Which hedge funds could benefit?[more]

    Big hedge funds win again on PetSmart, Riverbed From CNBC.com: Another week, another set of wins for activist investors. On Sunday, pet supply retailer PetSmart agreed to the largest leveraged buyout of the year at $8.7 billion. Hedge fund firm JANA Partners had been pushing for a sale a

  2. Outlook - Hedge fund manager who remembers 1998 rout says prepare for pain, Bond guru Bill Gross predicts U.S. economic growth to dip to 2%[more]

    Hedge fund manager who remembers 1998 rout says prepare for pain From Bloomberg.com: Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia. He was soon working around the clock when investors began targeting the region’s

  3. Investing - Hedge funds get boost from healthcare in 2014, Paulson & Co takes stake in Salix on heels of inventory issues[more]

    Hedge funds get boost from healthcare in 2014 From Valuewalk.com: The healthcare sector started the year on a turbulent note, as stocks of many major biotechnology companies were battered. However, most of the players in this sector have bounced back. The BarclayHedge Healthcare & Biotec

  4. Opalesque Exclusive: U.S. legal receivables fund launched in August[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Investing in asset-backed receivables is a strategy that has been an integral part of the alternative investment space within the overall fixed income asset c

  5. Comment - High fees and low performance hit hedge funds[more]

    From FT.com: Disenchantment over high fees and lackluster performance may finally be turning the tide against hedge funds, fresh data suggest. Despite generally weak returns since the global financial crisis, hedge funds have enjoyed positive net inflows every year since 2010. This helped assets und