MSCI Hedge Fund Index Powers Ahead 1.8% in December

January 14, 2004 ( - Preliminary reports show the MSCI Hedge Fund Composite Index posting a December increase of 1.8%, a significant increase from November's comparatively scant 0.7% gain.

November’s showing represented a slowdown from October  (see  MSCI: Hedge Funds Gain Slows to 0.7%).  In December, the Composite underperformed the MSCI World Equity Index (58% of funds reporting), which, according to early reporting, is up 6.2%.  For the year, the Composite index is at 14.7%, a relatively meager figure in comparison to its World counterpart’s return of 30.9%, according to a MSCI news release.

The World Sovereign Debt Index had a return of 3.9% for the month, and 15% for the year.

Hedge Fund Indices

Performance was relatively strong for December, with two indices turning in a +2% performance and two more nearing 2%. The highest December return came from Directional Trading, which reflected a 2.9% gain with 66% of funds reporting. Directional Trading, strategies based upon speculating on the direction of market prices of currencies, commodities, equities, and bonds in the futures and cash markets, is up 10.6% year to date. 

Following on its heels was Specialist Credit Index, which reported an increase of 2.2%, with 51% of funds reporting.  Specialist Credit, funds that seek to lend to credit-sensitive issuers, had a year-to-date return of 23.4%.

The two indices approaching 2% returns were Security Selection (57% of funds reporting) and Multi-Process Group (68% of funds reporting) – both with 1.9% gains over the month. Security Selection, those who combine long positions and short sales with the aim of benefiting from their ability in selecting investments while offsetting systematic market risks, has a year-to-date return of 19%. Multi-Process, strategies in which a single investment process does not account for more than 80% of their risk capital, has now returned 18.1% year to date.

The Relative Value Index was the month’s laggard with a mere 0.3% advance for the month with 53% of funds reporting and a 6.7% year-to-date performance.

The MSCI Hedge Fund Indices are composed of more than 190 indices. More than 1,800 hedge funds have agreed to participate in the database and there are over 1,600 hedge funds currently in the MSCI Hedge Fund Indices and Database.