Industry Updates

ZHAW: HedgeGate Swiss FoHFs Index up 0.16% in October, 6.95% YTD

Saturday, December 12, 2009

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Opalesque Industry Updates - After six consecutive months of per-formance gains, the hedge fund indus-try took a breather in October. Measured through the hedgegate Swiss FoHF Index (SFoHFI), Swiss-registered funds of hedge funds (FoHF) denomi-nated in US dollars have retrenched 0.16% in October 2009. Encouragingly, the gap to the HFRI Fund Weighted Composite Index disappeared com-pletely. On average, Swiss funds of hedge funds were up 7% for this year through October 31. Thus, the gap to the HFRI Fund Weighted Composite Index (up over 15% YTD) remained substantial.

Global equity markets taking a breather as well

Global equity markets, as measured by the MSCI World, took a correction of 1.8%, while the S&P 500 Index – led by financials – fell even 2%. Over the same period of time even the MSCI Emerging Markets Index was flat. Reminder: On a YTD basis the HFRI Emerging markets (Total) Index had reached the best per-formance (+35.8%) across all regions. Equity volatility rose over the month, both in the US and in Europe. The USD con-tinued to experience weakness across a range of currencies, including the Euro.

Swiss registered FoHF: Performance persistency in the short run

The top performers of October 09 achieved their returns with various strate-gies. An attribution to certain winning manoeuvres seems not possible since some commodity, market neutral, fixed income arbitrage and wide diversified strategies were able so satisfy investors’ expectations. For the Swiss registered products it is notable that the managers who were able to take the lead with respect to return (and risk, expressed by the Sharpe ratio) in the previous three months have also played a leading role in October. A certain persistency is visible in the market. One month returns for Swiss registered funds, denominated in USD, range from 8.84% to -5.61% in October and span between 8.34% to -0.76% in the last three months. These figures indicate that the rally for the crown 2009 is still ongoing. The detailed report for all cur-rencies is available on www.hedgegate.com (funds of hedge funds -> performance list).

Going forward
From a statistical point of view, the HFRX Global Hedge Fund Index is quite a good estimator for HFRI Fund of Funds Index returns. Since the fund of funds index usually reports slightly lower returns, a correction needs to be made. Current estimates, based on the reported No-vember return of the HFRX, forecast a FoFH return of approximately 1.5%. Considering this and extrapolating the average return of the months January until November to December would imply a total return of the fund of hedge funds composite index of 12.5% for 2009.

HedgeGate, ZHAW School of Management and Law, Centre Alternative Investments & Risk Management, Switzerland - www.zai.zhaw.ch.

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