MSCI Hedge Fund Index Rises in November, But

The equity index showed a 5.25% November return while the debt index reported a 0.13% gain during the month.  Year-to-date, the MSCI Hedge Fund Composite Index is up 2.50%, ahead of the 16.94% decline of the MSCI World Equity Index but behind the 13.90% gain of the MSCI World Sovereign Debt Index.

For the three years ending November 2002 the MSCI Hedge Fund Composite Index outperformed both global equities and sovereign debt with a 9.20% gain versus a -14.12% decline for equities and a 4.44% gain for sovereign debt as measured by the MSCI World Equity and Sovereign Debt Indices, respectively.

Equity Funds in Front of Fixed Income

Hedge funds focusing on equities modestly outperformed those focused on fixed income in November as indicated by the 1.60% gain in the MSCI Hedge Fund Equity Index versus the 1.34% gain for the MSCI Hedge Fund Fixed Income Index.

Conversely, on a year-to-date basis, fixed income focused funds have outpaced those funds with equity linked strategies, as the MSCI Hedge Fund Fixed Income Index was up 6.18% versus a 0.19% decline of the MSCI Hedge Fund Equity Index.

However, funds that invested in both equity and fixed income have fared the best year-to-date, gaining 7.24% as measured by the MSCI Hedge Fund Diversified Index.

Geographically, funds focusing on North American investments performed best in November gaining 2.18% as measured by the MSCI Hedge Fund North America Index, while the MSCI Hedge Fund Japan Index was the worst performing geographic index with a 0.53% decline.

The MSCI Hedge Fund Europe Index was the best performing geographic index year-to-date with a 6.34% gain while the MSCI Hedge Fund North America Index lagged the pack with a 1.24% loss.

Process Group Analysis

According to MSCI, the performance of the MSCI Hedge Fund Composite Index may be further analyzed by reviewing the five Process Group Indices that comprise it: MSCI Directional Trading, Relative Value, Security Selection, Specialist Credit and Multi-Process Indices.

In November, the best performing Process Group Index was the MSCI Security Selection Index, which gained 2.13%, driven by the performance of funds in the Long Bias Investment Process.

However, on a year-to-date basis, the MSCI Security Selection Index was the worst performing Process Group Index with a 0.74% loss. Conversely, the MSCI Directional Trading Index was the worst performing Process Group Index in November with a 1.06% decline, but remains the best performing Process Group Index year-to-date, up 7.47%.

This strong year-to-date performance was driven by funds in the Systematic Trading and Tactical Allocation Investment Processes, MSCI said.