Small-Cap Equity Hedge Funds Elbowed Out Larger-Caps

January 30, 2003 ( - Equity hedge funds focusing on small-cap issues fared better during 2002 than those with mid or large-cap concentrations, according to MSCI data.

According to MSCI’s 2002 Hedge Fund Indices Global Summary report, which offers a more detailed picture of MSCI’s already released performance data, (See  It’s Official: Hedge Fund Index Better by 3.7% in 2002 ) small-cap equity hedge funds lost 3.5% for the year while its counterparts focusing on mid and large-size companies gave up 6.1% for the year.

From an asset-class perspective, 60% of funds and 61% of assets in the MSCI Hedge Fund Indices are equity-based, 8% of funds and 9% of assets are fixed income, while 21% of funds and 19% of assets are diversified among several asset classes. Some 32% of funds and 38% of assets are in mid and large-cap while 14% of funds and 11% of assets are small and mid-cap. The remainder have no capitalization focus, MSCI said

Global Positioning

The report said the MSCI Hedge Fund Composite Index is dominated by funds focusing on North America and funds that don’t confine their focus geographically. The strongest performance over the last 12 months came from developed market funds with a diversified geographic focus, gaining 10.9% during 2002 and 10.9% annual over the last three years.   MSCI said funds focusing on European securities gained 9.1% over the year and 7.9% annually over the last three while funds with a North American focus lagged with a 1.6% loss during 2002.

Also in the MSCI report, offshore domiciled funds outperformed US funds by 4.8% in 2002 and 0.8% annually for the last three years.