Investing January 16, 2004

Van US Hedge Fund Index Turns in 17.5% 2003 Showing

January 16, 2004 (PLANSPONSOR.com) - What a difference a year makes. Twelve months after only managing a scant 0.2% return, the Van Global Hedge Fund Index posted a 2003 showing of 17.5%, according to hedge fund consultant Van Hedge Fund Advisors International (VAN).
Reported by

A VAN news release said the index was ahead by 1.7% for December.  Meanwhile, VAN said the Van US Hedge Fund Index, which includes only those hedge funds domiciled in the United States, rose 1.8% net in December and 19% for the year. The Van Offshore Hedge Fund Index posted slightly lower gains of 1.7% net for December and 16.4% net for the year.

VAN said hedge funds’ 2003 success came in part from the rebounding US equity markets. The S&P 500 ended the year ahead by 28.7% while the NASDAQ rose 50.8%. Due to their use of short selling and other hedging tactics, hedge funds were generally unable to keep pace with those benchmarks as equities bounced back from steep losses in the prior three years.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

Goings on in the broader US equity arena, however, were only one factor influencing hedge fund returns last year. The best performing hedge fund strategy in the Global Index by far in 2003, Emerging Markets didn’t invest in US equities at all. Emerging Markets funds averaged a 42.1% net gain last year.

Distressed Securities funds, which invest in the debt and equity of bankrupt or otherwise troubled companies, were next in line with a 27.7% net 2003 advance. Aggressive Growth, a long/short growth stock strategy, followed, up 27% net in 2003. The sole 2003 loser was Short Selling, which gave up -24.2% net as market direction turned against those funds.

For December, Emerging Markets was again the best performing strategy in the Global Index, up 6% net. Macro and Value gained 3.2% net and 2.5% net, respectively. Positive returns were widespread last month, with more than eight of 10 funds reporting gains. Only about one in ten , however, was able to beat the S&P 500’s 5.2% December return.

The Van Global Hedge Fund Index reached a new high value of 10,629.28 in December. The Index began with a value of 1,000 in January 1988. Past index performance is at  www.hedgefund.com.Final December and year 2003 returns for the Van Hedge Fund Indices will be calculated at the end of January, based on a substantially larger sample of hedge fund returns and will likewise be posted at www.hedgefund.com .

The December Index was based on the returns of more than 800 hedge funds. Not including funds of funds, the Index gained 18.3% net in 2003; the December return was the same with or without funds of funds.

«