MSCI: Hedge Funds Inch Higher In July

August 13, 2003 ( - Preliminary results show the MSCI Hedge Fund Composite Index managed a slim 0.1% return in July.

With 60% of the funds reporting, the Composite’s gain is lower than June’s 0.5% (See  MSCI Hedge Fund Index Wrings Out Gain In June ) and alsolower than the MSCI World Equity Index, which was up 1.9%.  For the year, the Composite index is up 8.1%, underperforming its World counterpart’s 12.1% return, according to a MSCI news release.

Compared to the World Sovereign Debt Index, which returned a negative 3% in July, the Composite index was better for the month.  For the year, the World Sovereign Debt Index has stayed on the positive side, up 4%.

Per Group 

July’s largest process group gainer, based on 59% of funds reporting, was Security Selection, up 1.2%.   Security Selection, those managers who combine long positions and short sales with the aim of benefiting from their ability in selecting investments while offsetting systematic market risks, has now returned 9.5% year-to-date.

Gains were also recorded in Specialist Credit and Multi-Process Group, both of which were better by 0.6% for the month.   Specialist Credit, those funds that seek to lend to credit-sensitive issuers, has now returned 11.7% year-to-date, based on a 58% reporting rate, and multi-process, strategies that focus on spread relationships between pricing components of financial assets or commodities, is better by 10.6% on the year, with 53% of fund returns in.

On the other hand, Directional Trading and Relative Value did not fare so well in July, ending up in the red by 1.8% and 0.5%, respectively.   With 68% 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 still up 6.7% year-to date.   Similarly, Relative Value is still positive for the year (4.8%) even after a lackluster July, with 57% of funds reporting.

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 and there are over 1,550 hedge funds currently in the MSCI Hedge Fund Indices and Database.