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January Jump for CSFB/Tremont Hedge Index

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NEW YORK (–Solid December performance led to great January numbers for the Credit Suisse/Tremont Hedge Fund Index, which posted a 3.23% increase for the month in what was the highest monthly return since August 2000, according to President Oliver Schupp.

All but one of the ten sub-strategies included in the index rang in the first month of 2006 with gains. Emerging markets managers were the month’s best performers, up 5.76%, nearly doubling their 2.44% December increase. Growing global appetite for risk also helped long/short managers produce a 4.18% return in January, following 2.78% in December, in what were as the second-highest results for January.

Global macro strategies, through long equity exposure and short positions in European and Japanese bonds, returned 3.37%; the event-driven category grew by 2.92%, with distressed, event-driven multi-strategy and risk arbitrage returning 2.52%, 3.32% and 1.63%, respectively.

“Event-driven hedge fund managers had one of their strongest months in recent history, taking advantage of a tightened credit spread throughout the month and an increase in announced mergers and acquisitions after the start of the new year,” said Tremont Capital Management Inc. Chief Executive Robert I. Schulman, speaking in a statement.

But no less impressive was the growth registered by convertible arbitrage managers, much maligned in 2005. The category posted a 2.75% increase in January, nearly three times the 0.96% earned in December and the strongest performance in three years, noted Mr. Schupp: “The managers profited from higher valuations and increased inefficiencies after a year of numerous fund closures in 2005.”

Managed futures increased 2.71% in January in what was the biggest improvement over December results, when that category was down 2.53%. More increases were found in multi-strategy, up 2.76%; fixed income arbitrage, 1.42%; and equity market neutral, 1.4%.

Dedicated short bias, the only strategy to lose money in January, was down 2.98%, continuing to dive after a December decrease of 1.96%.

The Credit Suisse/Tremont Investable Hedge Fund Index, meanwhile, returned 1.85% in a month of largely mixed results. In December the index was up 0.58%.

The success enjoyed by the Credit Suisse/Tremont Index was shared elsewhere. While the Dow Jones Industrial Index was up 1.5% in January, the MSCI EAFE US $ Index increased 6.15%; the MSCI $ World Index, 4.48%. The Nasdaq Composite US $ Index grew 4.56%. All the benchmarks were up significantly from their December performances.

Still, a month of solid returns are welcome news for hedge fund investors, after 2005 proved to be a year of mixed results that prompted the possibility of redemptions and outflows.

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