Absolute Return: A Comparative Review of Recent Hedge Fund Performance
Eurekahedge
Introduction
Persisting turmoil in the global financial markets has led to several media reports in recent months painting hedge funds in a negative light, in terms of performance and/or redemptions. Such reports tend to ignore that there are two sides to the hedge fund performance coin – absolute return and conservation of capital. Some losses may be unavoidable in any period of turmoil, as managers close current positions (be they in response to margin calls or stop-loss triggers), and reallocate funds to safer asset classes. We believe that an objective look at hedge fund performance would have to include a comparison against more conventional asset managers. To that end, this article examines the performance of hedge funds in recent months against that of mutual funds1 and relatively new enhanced equity products (such as 130/30 funds). The rationale for the comparison was to uncover the effect of varying degrees of short exposure on fund performance. The following table shows the performance ranking of these fund types against the S&P 500.
