Hedge funds beat equities

HEDGE funds dramatically outperformed stocks over the last decade, according to the Hennessee Hedge Fund Index, which tracks the performance of more than 1,000 diversified hedge funds.

The Hennessee Hedge Fund Index gained 88.3 per cent from January 2000 to December 2009, while the S&P 500 fell 23.33 per cent, the Dow Jones Industrial Average fell 9.3 per cent and the Nasdaq Composite Index fell 44.24 per cent, it says.

“With one of the most challenging decades coming to a close, I feel hedge funds performed admirably,” said Charles Gradante, co-founder of Hennessee Group.

“There has been a lot of talk about the ‘lost decade’ for stocks. However, there has not been much said about the performance of hedge funds,” he said. “While stocks actually declined in value at an annualised rate of 2.62 per cent per year [for the S&P 500], hedge funds posted an annualised positive return of 6.54 per cent.”

The top performing strategies over the past decade were financial equities funds, which performed well in 2008, as they were able to foresee many of the financial problems and generate gains shorting; healthcare and biotechnology funds and distressed funds, which performed well after default cycles in 2003, 2004 and 2009.

Asset manager GLG Partners this week added its own optimistic forecast for global markets – except for in the UK. John White, GLG’s head of UK equities told the Hedge Fund Journal that Bank of England monetary policy, the winding up of quantitative easing and record fiscal deficits put the value of sterling at risk. He added that a minority government could bring economic policy paralysis and more market uncertainty.