Hedge Fund Performance Dips

March 14, 2002 (PLANSPONSOR.com) - Although the performance of hedge funds was generally lackluster over the month, the Average US Hedge Fund generally outpaced the market in February, inching down by -1.1%, according to Van Hedge Fund Advisors International, Inc. (VAN), a hedge fund advisory firm.

The average offshore-domiciled hedge fund, however, remained level over the month.

In comparison,

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  • the S&P 500 dropped by -1.9%
  • the Nasdaq shed a massive -10.5%.

According to VAN, about 49% of reporting hedge funds experienced a net gain in February, and over three-quarters beat the S&P 500.

On a global basis, four of the strategies in the Van Hedge Fund Index were profitable in February, with the others suffering mild losses.

Short Seller Shine

Short Selling, where managers borrow stock on collateral and immediately sell it on the market with the intention of buying it back later at a lower price, was the most successful strategy, with prices pushed lower by the Enron debacle, mixed earnings reports, and weak consumer confidence.

On average, US Short Sellers gained 3.3% net over the month, while their offshore counterparts earned a 2.4% net return.

For the second straight month, Aggressive Growth was the worst performing strategy as growth stocks continued to give back some of their gains from late 2001, VAN reports.

Year to Date

On a year-to-date basis, the Average US Hedge Fund has lost -0.6% net, while the Average Offshore Hedge Fund has returned 1.0% net. In comparison, the Average Equity Mutual Fund has lost -4.2% this year to date, according to data from VAN.

US Short Selling and Offshore Short Selling have been the most successful strategies so far this year, increasing by 8.7% and 6.3% respectively.

VAN’s data on hedge funds is based on information received from the hedge funds in an affiliate’s databases and may not be representative of all hedge funds.  The February Index was created using a sample of 776 funds.