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Distressed a Top Performer in 2004, CSFB Index Up 9.64%

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NEW YORK (–Distressed managers charged ahead once again and finished the year as best performing sub-category of the CSFB/Tremont* Hedge Fund Index with a return of 13.62% for the year ended Dec. 31. The overall index closed out the year 9.64%.

In December, the index was up 1.6%, while distressed managers, part of the event-driven category were up 1.92%. For the year, event-driven funds showed the highest returns among the primary strategy categories. Event-driven, a grouping of distressed, multi-strategy and risk arbitrage sub strategies, was up 14.47%. Risk arbitrage was on the low end of the event-driven return spectrum with a gain of 5.45% in 2004.

Event-driven managers generally profited from long credit positions and distressed trades, said Robert I. Schulman, co-chief executive of Tremont Capital Management Inc., Rye, N.Y., in a statement.

While performing well for the year, event-driven strategies were not at the top of the CSFB/Tremont index last month, though, as long/short equities posted a positive 2.57% in December.

As U.S. equity markets picked up some gains in December, most hedge fund managers were able to pick up returns on the long side of their portfolios, said Oliver Schupp, president of Credit Suisse First Boston Tremont Index LLC, in a statement.

Dedicated short-bias managers were hurt by equity market gains and lost 4.87% in December and gave up 7.72% in 2004. The strategy was the only one to post negative returns over the course of the month or the year, while most strategies finished between 1% and 2%.

The CSFB/Tremont Investable Hedge Fund Index was up 0.99% net in December and finished the year at 5.24%, slightly below its non-investable counterpart. Emerging markets had the most impressive returns in 2004 with a positive 15.26% through year-end. For December, long/short equity managers profited with a boost of 3.33% and annual gain of 9.96%.

The investable index differs from the original CSFB/Tremont Hedge Fund Index in that it is based on a smaller set of funds with aggregate assets of US$95 billion, while the broad index is representative of 382 funds with US$311 billion in assets under management.

The third index set in the CSFB/Tremont collection, the CSFB/Tremont Sector Invest Indexes, tracks constituents with US$134 billion in aggregate assets under management. Generally in line with the results of the other indexes, the sector indexes show dedicated short-bias losing 13.24% in 2004, but managed futures strategies as the top-performing strategy with an annual gain of 10.41%.

Global macro managers in the sector indexes posted a loss of 0.14% in December and were up only 1.2% for the year. In the broad and investable indexes, global macro was up 8.49% and 2.65% respectively.

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

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