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November a Winner in Van Index

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NASHVILLE, Tenn. (–Hedge funds had their best month of 2004 in November by the reckoning of the Van Global Hedge Fund Index, which gained 2.8% in the period.

The index represents the average net return of approximately 800 hedge funds reporting to the index’s tabulator, the hedge fund consultant Van Hedge Fund Advisors International LLC.

The Van U.S. Hedge Fund Index, calculated only from U.S.-domiciled funds, did even better, turning in a 3.4% gain for November. Van’s Offshore Hedge Fund Index gained 2.1% for the month. Year to date, the U.S. index was up 6.8%, while the offshore tracker was up 5.5%.

Stocks mostly had an even better November following a trouble-free U.S. presidential election, with the Standard & Poor’s 500 stock index rising 4%, the MSCI World Equity Index up 5.1% and the Dow Jones Europe Stoxx 50 gaining 5.8%.

“The average hedge fund couldn’t keep pace with stocks’ sharp upturn last month,” noted George Van, chairman of Van. “But hedge funds did succeed in delivering broad-based gains in November, with almost 90% of the funds in the Van Global Hedge Fund Index reporting a positive net return.”

For the year, the Van global index, with a 6.2% gain, trailed most major stock indexes; through November the S&P was up 7.2%, with the MSCI World Equity and Dow Jones Europe turning in 8.8%.

Bonds underperformed hedge funds both in November and for the year. The Lehman Brothers Aggregate Bond Index was down 0.8% for the month, with a gain of 3.4% for the year to date.

Each of Van’s four broad strategy groups was positive in November. For the second straight month, the Directional Trading Group was the strongest performer, gaining 4%. The Long/Short Equity Group followed with a 3.8% gain. The Market Neutral Group posted a 2% net return for the month, while the Specialty Strategies Group, weighted down by short sellers’ losses, gained 1.4%.

For the year, long/short equity was up 6.6% and market neutral gained 5.9%, while directional trading had a net gain of 4.4%.

Except for short selling, all the individual global strategies tracked by Van had positive November returns. Futures averaged the best, gaining 5.4%, followed by Aggressive Growth, up 4.9%. Emerging Markets and Special Situations tied for third, at 4%, while the lone loser was Short Selling, turning in a negative 6.5%

Likewise, all strategies but Short Selling showed an average net gain for the year. Distressed Securities led the pack of 14 strategies, with a 15.4% return, followed by Emerging Markets, up 11.4%, and Value, up 9.2% Short Selling posted a 4.9% net loss for the year.

For the first month since January, all four of Van’s global arbitrage sub-strategy indexes posted a gain. Merger arbitrage was best at 1.4% (2.3% for the year), followed by convertible arbitrage’s 0.9% gain (0.4% year to date). Statistical arbitrage was next, gaining 0.5% (2.2% for the year), followed by fixed-income arbitrage, up 0.2% for the month but a leader for the year with a 5.5% gain.

Contact Bob Keane with questions or comments at: [email protected].