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Portfolio > Alternative Investments > Hedge Funds

Hedge Funds Tracked by MSCI Return 0.1% in July

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NEW YORK (–The MSCI Hedge Fund Index returned a meager 0.1% in July, based on early data from hedge funds reporting to MSCI.

As a result, year-to-date hedge fund returns are starting to look less impressive, after beginning the year with good performance. For the first seven months of 2003, the MSCI Hedge Fund Index is up 8.1%, but had already returned 7.51% by the end of May.

Nevertheless, a hedge fund cornerstone, long/short equity funds, appeared to have another good month, as the MSCI Security Selection Index returned 1.2%, bringing its year-to-date returns through July to 9.5%. In the same period, the Standard & Poor’s 500 stock index returned 1.62% and was up 12.56% in the first seven months of the year, respectively.

The Security Selection Index also includes market neutral funds, long-only and short selling equity funds. June’s final Security Selection returns came in at 1.3%, following a preliminary report of 1.4%.

MSCI’s other four hedge fund groupings didn’t do as well in the month. Both the MSCI Specialist Credit Index and the MSCI Multi-Process Group Index returned 0.6% in July. The Specialist Credit Index–which includes distressed funds, private placement funds and long/short credit funds–returned a strong 11.7% in the year-to-date period through July. June’s returns were 1.7%.

The MSCI Multi-Process Group returned 10.6% in the year-to-date through July period and was up 1.4% in June, though preliminary results showed a return of 1.7%. The Multi-Process category includes event-driven funds and multiple strategy funds.

Merger arbitrage, statistical arbitrage and general arbitrage funds, collected in the MSCI Relative Value Index, returned negative 0.5% in July and were up 4.8% this year through July. In June, the Relative Value Index returned 0.1%, up slightly from the preliminary return of 0.0%.

July was another tough month for the MSCI Directional Trading Index, which includes futures funds and global macro funds. That index returned negative 1.8% in July after falling 1.6% in June (preliminary returns were a negative 2%). Year-to-date through July the Directional Trading Index returned 6.7%.

The MSCI World Equity Index returned 1.9% in July and was up 12.1% year-to-date through July, while the MSCI World Sovereign Debt Index returned negative 3% and positive 4% in the same respective periods. The July performance numbers were compiled with 60% of funds in the index, which is equal-weighted, reporting.

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