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CSFB/Tremont Index Posts 1.7% Gain in January

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NEW YORK (–The CSFB/Tremont* Hedge Fund Index was up 1.7% in January, with all investment strategies yielding positive returns except for dedicated short bias.

Emerging markets hedge funds led the way, with a 2.53% return for the month ended Jan. 31. The strategy seemed to outshine other hedge fund categories in 2003 as well, with a return of 28.75% for the 12 months ended Dec. 31.

The overall hedge fund index was up 15.44% in 2003, while the Standard & Poor’s 500 Stock Index bounced back with a 28.68% gain for the same time period. In January, the traditional stock and hedge fund indexes were posting close returns with the S&P 500 gaining 1.84%.

Individually, a number of hedge fund strategies outperformed the S&P in the last month. The distressed securities category was up 2.42%, while event-driven strategies as a whole returned 2.16%. Also under the event-driven umbrella is the event-driven multi-strategy funds category, which also was at the top of the charts in January with a 2.01% return. Another event-driven strategy, risk arbitrage, didn’t perform as well, with a gain of only 0.83% for the month.

Long/short equity also posted a 2% return. A number of other strategies had returns of 1% or higher, including: multi-strategy, 1.6%; global macro, 1.45%; convertible arbitrage, 1.42%; fixed-income arbitrage, 1.23%; and managed futures, 1.09%.

Equity market neutral lived up to its reputation of neutrality with meager returns averaging 0.82%.

Stuck in a rut, dedicated short-bias managers have had a hard time in recent months. In November and December, the strategy posted negative returns and ended the year with a negative 32.59% return. For January, the losses weren’t as steep, though the category lost 1.73%.

Funds Added and Dropped

The index added 13 new funds last month, according to officials. They are: TQA Master Plus Fund Ltd.; Nisswa Master Fund Ltd.; AdvantHedge LP; Asia Debt Recovery Company Ltd.; Galleus Sub Fund; The Argo Fund Ltd.; Sabre Style Arbitrage Fund Ltd.; Wayland Recovery Fund; Pequot Healthcare Fund; Clovis Capital Partners; Cambrian Incremental Fund Class B (Euro); Zulauf Europe Fund; Basswood International Fund Inc.; and Blue Sky Japan LP.

Four funds were dropped from the index. They are: Vector Capital Fund Ltd. (Class A), Vector Capital Partners LP and Petros Fund LP, all of which liquidated, and Stonehill Offshore Partners Ltd., which is no longer reporting. There also were several technical adds and drops last month as a result of the aggregation of various share classes of the same fund into composite vehicles, according to CSFB/Tremont officials. In addition, Mariner Fund switched categories, from event driven to multi-strategy.

As of Jan. 1, the index comprises 416 funds, which are drawn from the TASS and CSFB/Tremont databases of more than 3,000 hedge funds.

Investable Index Returns

The investable index returns generally mirror the traditional index returns, but this month the investable index returns were lower than the traditional index only gaining 1.10% in January.

The main difference, though, was that instead of emerging markets managers leading the way, long/short equity managers were the best performers with 2.01% returns for the month. The performance of the emerging markets category, which returned 0.41%, was markedly different than its non-investable counterpart, which posted 2.53% returns for the month.

Convertible arbitrage managers performed better in the investable index with a gain of 1.83%, while dedicated short-bias managers lost 1.65% for the month.

Event-driven returns were lower than the non-investable index with only a boost of 1.53% in January. Fixed-income arbitrage, which returned 1.06%, was the only other strategy that performed over 1% for the month. Equity market neutral, global macro, managed futures and multi-strategy funds all did well but failed to post gains of more than 1%.

The investable version of the CSFB/Tremont hedge fund index was launched with 60 hedge funds across 10 style-based sectors. The index included 100 funds as of Aug. 1, with US$55 billion in assets under management. By comparison, the overall CSFB/Tremont index components have US$199 billion in assets under management.

*Tremont Capital Management Inc., Rye, N.Y., is a strategic partner of and a minority investor in HedgeWorld.

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