Hedge Fund Returns Even Things Up in Q4

January 16, 2003 (PLANSPONSOR.com) - Hedge funds rebounded in the final quarter, but ended 2002 pretty much where they began the year, according to global hedge fund advisory firm Van Hedge Fund Advisors International.

The average U.S.-based hedge fund sustained a slight loss of 0.2% after fees in 2002, according to Van Hedge, while the average offshore-domiciled hedge fund produced a small 0.5% net gain for the year. According to the report, US hedge funds fell 0.3% net in December, but gained 3.5% net in the year’s final quarter.   Offshore hedge funds earned 0.5% net last month and 2.5% net for the quarter.

Not surprisingly, given the soft investment markets, the big winners in 2002 were Short Selling hedge funds, which bet on falling stock prices, according to the report.   US Short Selling funds averaged a 32.1% net gain for the year, while Offshore Short Selling funds posted a 25.9% gain, on average.

U.S. Emerging Markets posted gains of 11.2%.   Market Neutral Arbitrage funds, which take advantage of various market inefficiencies and maintain a low overall market exposure, averaged net returns of 8.5% in the U.S. and 7.5% offshore.

George Van, chairman of Van, noted that in 2002, the S&P 500 fell 22.1%, the NASDAQ shed 31.3%, and the average equity mutual fund lost 20.3%.

Quarter Flip?

For fourth quarter, US hedge funds specializing in the Media/Communications sector led with an average 14.5% net gain, followed by US Macro funds, with an average 11.7% net gain, and Offshore Emerging Markets funds, with an average 6.3% net return.

However, for the month the best performing strategies were US Short Selling, Offshore Short Selling, and US Macro, which had net returns of 5.2%, 4.7%, and 4.3%, respectively, according to the report.

Van Hedge Fund Advisor’s hedge fund index information is based on information received (and not audited or independently verified) from the hedge funds in an affiliate’s databases and may not be representative of all hedge funds, according to the firm.