MSCI Hedge Fund Index Achieves Slight February Gain

March 25, 2003 ( - The MSCI Hedge Fund Composite Index chalked up a 0.81% advance in February, slightly lower than January's 1.38%.

According to a news release, the MSCI World Equity Index declined 1.9% during the month. Over the past three-year period, the MSCI Hedge Fund Composite Index, which returned 6.59%, has outperformed the MSCI World Equity Index, which returned -17.50%. The MSCI Sovereign Debt Index returned 1.41% for the month of February while LIBOR increased 0.11% for the month.

Other February results included:

  • Similar to January, the best performing process group was Directional Trading, which returned 4.01% for February bringing its year-to-date return to 7.59%. Both Systematic Traders, which returned 4.56% in February, and Discretionary Traders, which returned 3.79%, contributed to the outperformance of the Directional Trading Group.
  • Systematic Traders have consistently outperformed other processes with a 9.76% year-to-date return and a 34.35% one-year return.
  • Security Selection and Multi-Process continued to underperform other process groups with a negative return of 0.45% and 0.12%, respectively. On a year-to-date basis through February 28, Security Selection is the only negative process group, returning 0.13%. Within Security Selection, all processes produced negative returns for the month except for Short Bias, which gained 0.40%. On the other hand, Long Bias returned -0.70% making it the worst performing Security Selection process.
  • Relative Value funds returned 0.61% for February mostly driven by Arbitrage at 1.05%. More specifically, Convertible Arbitrage led the way with a 1.48% return and Fixed Income Arbitrage followed behind at 0.65%. Long-Short Credit, which returned 1.29% for the month, helped Specialist Credit funds become the second best performing process group for February at 1.06%, bringing its year-to-date return to 2.79%.
  • The MSCI Hedge Fund Fixed Income Index advanced1.12% in February, outperforming the MSCI Hedge Fund Equity Index which dropped by 0.32%. These results were consistent with Specialist Credit funds outperforming Security Selection funds over the same period.

The MSCI Hedge Fund Diversified Index, which reflects hedge funds that invest in equity, fixed income, commodities and currencies, was the best performing asset class index returning 2.76% in February and bringing its year-to-date return to 6.06%. Directional Traders who invest primarily in diversified asset classes, including commodities and currencies, drove the returns for this index.

The MSCI Hedge Fund Developed Market Index, which returned 0.85%, slightly outperformed the MSCI Hedge Fund Emerging Market Index at 0.77%, but both outperformed their relevant equity indices. These hedge fund results were consistent with equity markets given that the MSCI Emerging Markets Free Index, which declined 3.20%, underperformed MSCI World Equity Index, which declined 1.90%. In contrast to last month, hedge funds investing in Europe, which returned -0.26%, underperformed those investing in North America, which returned 0.40%. Japan funds returned 0.22% in February.

The MSCI Hedge Fund Indices are composed of more than 160 indices. More than 1,700 hedge funds have agreed to participate in the database.