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January 19, 2004 at 07:00 PM
NEW YORK (HedgeWorld.com)–Emerging markets hedge fund managers had it good in 2003, good enough to beat both the Standard & Poor’s 500 Stock Index and the Dow Jones Industrial Index in a strong year for equity returns.
According to the Credit Suisse First Boston/Tremont* Hedge Fund Index, emerging markets managers returned 28.75% for the 12 months ended Dec. 31. The S&P 500 returned 28.68%, and the Dow gained 28.26% during the same time period.
Emerging markets returns in 2003 led all strategies in the CSFB/Tremont index and were the biggest contributor to the total index’s 15.44% return in 2003–a roughly five-fold improvement over the 3.04% full-year return the hedge fund index earned in 2002.
“The year-end story belongs to the emerging markets sector,” said Robert I. Schulman, co-chief executive of Tremont Capital Management Inc., in a statement. “The strategy provided consistent returns to investors all year.”
The “Reversal of Fortune” award for 2003 goes to dedicated short-bias managers. After ending 2002 up 18.14%, dedicated short-bias strategies in the CSFB/Tremont index returned a negative 32.59% in 2003. It was the only strategy to end the year with a negative return. Seven of the nine other style-based sector indexes finished 2003 with double-digit positive returns. The only sectors in single-digit positive return territory for 2003 were fixed-income arbitrage, which ended the year up 7.97% after a 0.8% return in December, and equity market neutral, which earned an annualized return in 2003 of 7.07% after posting a 0.93% return in December.
On a monthly basis, the CSFB/Tremont index ended the year on a high note, turning in a 1.95% return for December. It was the index’s third-highest monthly return of the year behind 2.71% in May and 1.96% in April.
Convertible arbitrage strategies earned 0.7% in December and finished 2003 with an annualized return of 12.9%.
Event-driven strategies returned 20.02% in 2003, led by distressed managers who earned 25.12% annualized through Dec. 31. Event-driven multi strategy returned 17.19% in 2003, and risk arbitrage earned 8.98%.
Global macro managers turned in 12-month 2003 performance of 17.99%, helped by returns that increased more than three-fold between the end of November and the end of December, from 0.55% in November to 1.86% in December.
Long/short equity funds earned 17.27% year-to-date through Dec. 31; managed futures returned 14.13% and multi-strategy funds earned 15.04%.
