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Portfolio > Alternative Investments > Hedge Funds

Emerging Markets Emerge on Top for September

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NEW YORK (–Hedge funds in the CSFB/Tremont index had a good September in general, posting an overall return of 1.63%. For the year, the index is up 5.9%.

Among the stellar performers in September were emerging markets funds, up 4.12%; global macro managers, up 2.43%; and long/short equity vehicles, up 2.02%. These managers all fared well “on the back of rallying global equity markets,” said Oliver Schupp, president of Credit Suisse First Boston Index LLC. Yet dedicated short managers found profit in the markets as well and turned in a solid performance of 3%, contributing to an index-leading year-to-date return of 17.73%

Emerging markets funds are strong for the year as well, and have a second-best return of 15.07%.

Global macro funds “profited from tremendous opportunities in the marketplace which other sectors did not effectively take advantage of,” said Robert I. Schulman, chief executive of Tremont Capital Management Inc.

Event-driven funds, which in Tremont’s index comprise distressed, event-driven multi-strategy and risk arbitrage managers, also capitalized on favorable conditions and posted a return of 1.07% for the month. Mr. Schupp noted that the US$239 billion in new mergers globally created opportunities for the managers to generate profits.

A turnaround for convertible arbitrage managers, who had a dismal first half of 2005, continued, as the category turned in a positive September performance of 1.1%, following up on a 0.88% return in August. The strategy remains in negative territory–at minus 2.99%–the year, however. “The rebound in convertibles continued based on increasing demand and new issuances of convertible bonds,” Mr. Schulman said.

All the players on the CSFB/Tremont scorecard put up positive numbers. Multi-strategy funds were up 1.61%; managed futures, 1.38%; equity market neutral, 0.9%; and fixed-income arbitrage, bringing up the rear, up 0.12%.

For the year, the strategies beating the 5.9% index average, besides dedicated short and emerging markets, are event-driven, at 8%, global macro, at 7.32%, and long/short equity, at 6.84%.

On the equities side, the MSCI $ World Index is outperforming hedge funds for the year, with a return of 6.65% (2.63% in September), while the Dow Jones Industrial Index is negative 0.34% for 2005 (up 0.94% last month), and the Nasdaq composite index is down 1.09% (down 0.02% in September).

The CSFB/Tremont Hedge Fund Index tracks 408 funds as of Sept. 30. The index has dropped the following funds: Bear Stearns Global Convertible, Generation Japan Master, Rose Glen Capital Partners and Spyglass Capital.

Investable Returns

CSFB/Tremont’s Investable Hedge Fund Index was up an estimated 1.21% net in September, following a confirmed return of 0.52% in August. For the year, the index is up 2.92%.

Emerging markets was by far the best performer among the investables in September, with a return of 6.04%, bringing the category to a 15.86% performance for the year–which also leads the index.

Next-best for the month was the long/short equity sector, up 2.57% (8.61% for the year), followed by dedicated short bias, up 1.81% (11.5% for the year), global macro, up 1.62% (1.4% for the year), and managed futures, up 1.36% for the month but in last place in the year-to-date column with a 2005 return of negative 1.58%.

Convertible arbitrage, which was positive 1% for September, is the other negative performer for the year, to the tune of minus 1.07%

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