Hedge Fund Returns Up for First Half of 2005

July 8, 2005 (PLANSPONSOR.com) - The S&P Hedge Fund Index (HFI) showed a gain of .90% in the month of June, contributing to a gain of .13% for the first half of 2005, according to a Standard & Poor's press release.

According to Charles Davidson, Senior Hedge Fund Specialist at Standard & Poor’s, hedge fund managers are concentrating more on picking higher-yielding securities than simply managing liquidity. “Managers have become less risk averse due to a combination of more predictable monetary policy and contained inflation,” he said in the press release.

The S&P Arbitrage Index gained .24% in June. Convertible Arbitrage enjoyed positive performance for the month, after its difficult time coping with investor redemption selling, low volatility, tight credit spreads and low issuance, according to the news release. Capital has been removed from the strategy due to redemptions and the closings of several large funds, so prices have firmed.   Fixed Income Arbitrage returns were mixed in June.   As noted in the S&P announcement, some managers continued to profit from US yield curve flattening trades, while others experienced losses as they were forced to cover short bond positions.

The three underlying strategies of the S&P Event-Driven Index all ended June on a positive note, contributing to the Index’s overall gain of .85%.   Merger Arbitrage gained in spite of spread widening due to the Johnson & Johnson-Guidant deal, and Special Situations and Distressed strategies were positively influenced by stabilization of the high yield market and credit spreads, after the spike around the GM downgrade.

The S&P Directional/Tactical Index showed a positive return of 1.62% in June reflecting a rise in global equity markets.   The S& P Equity Long/Short Index gained 1.87% in June with its sub indices, the S&P Equity Long/Short Index – US and S&P Equity Long/Short Index ex-US, gaining 1.82% and 1.92% respectively.   Major profits made on long positions in the US dollar, bonds, crude oil, equity indices and grains contributed to the S&P Managed Futures Index ending up 1.86% for the month.