Hedge Fund Reader : Hedge Funds Outperform S&P; 500 in 2005

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July 12, 2005

Hedge Funds Outperform S&P; 500 in 2005

Standard & Poor's reports that hedge funds showed higher overall gains compared to equities both for the month of June and for the first half of 2005. The S&P Hedge Fund Index (S&P HFI) showed gains of 0.9% in June compared to a loss of 0.01% for the S&P 500 stock index. Returns for the first half of 2005 were at 0.13% compared to negative returns of 1.7% for the S&P 500. June's highest gains at 1.62% came from the Directional / Tactical Index, a sub-index of the S&P HFI. The S&P Event-Driven Index followed with strong returns in June at 0.85% positive. Of the three sub indices S&P tracks, S&P's Arbitrage Index posted the lowest return at 0.24% positive. S&P stated that the positive returns on sub-indices indicated that the three investment strategies underlying them all generated positive returns in June. Senior hedge fund specialists attribute the higher returns to higher risk appetite among hedge fund managers and an increasing focus on security selection, as opposed to liquidity management. Hedgeworld.com reports:

"Contained inflation rates and predictable monetary policy have made hedge fund managers less risk-averse said S&P's senior hedge fund specialist, Charles Davidson. [The monetary policy] has encouraged greater confidence in asset allocation toward higher-yielding risk assets and increased leverage to generate target returns."

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July 12, 2005 in Research | Permalink