With 62% of the funds reporting, the Composite’s gain is relatively even compared to the 1.8% advance posted in December (see MSCI Hedge Composite December Falls Short of November Showing ). The Composite was in line with the MSCI World Equity Index, which, according to early reporting, increased 1.6%. The Composite index performed much better than the World Sovereign Debt Index, which had a return of 0.4% for the month.
Hedge Fund Indices
The highest January return came from the Specialist Credit Index which reported an increase of 2.5%, with 52% of funds reporting. Specialist Credit contains those funds that seek to lend to credit-sensitive issuers.
The Security Selection Index, those who combine long positions and short sales with the aim of benefiting from their ability in selecting investments while offsetting systematic market risks, was the second best returning index, reporting a 2% advancement in its funds, with reports from 61% of funds.
Multi-Process Group Index, an index containing funds which use strategies in which a single investment process does not account for more than 80% of their risk capital, showed an increase of 1.6% on a 56% reporting rate.
The two indices that posted increases of less than 1% were the Relative Value Index and the Directional Trading Index, each posting monthly returns of 0.8%, respectively. Relative Value is the index focused on spread relationships between pricing components of financial assets or commodities, while Directional Trading focuses on strategies based upon speculating on the direction of market prices of currencies, commodities, equities, and bonds in the futures and cash markets.
The MSCI Hedge Fund Indices are composed of more than 190 indices and the MSCI Hedge Fund Indices now includes over 1,700 hedge funds.