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May 22, 2006 at 08:00 PM
LONDON (HedgeWorld.com)–The strongest first quarter for funds of funds in several years has led Standard & Poor’s to announce that it is stepping up its monitoring of the sector.
The ratings agency said in a statement that it would be “checking the reasons behind performance and potential flaws, such as rising correlation with equities, which could be problematic if a bear market looms.” The move follows data from the S&P Hedge Fund Index showing a 4% rise in the first quarter coupled with the average fund of funds beating the index with a return of 5.2%.
“The best performing funds were those with a directional bias, as in the second half of last year,” said Randal Goldsmith, S&P’s fund analyst, in a statement. “Groups that generally did well were HDF (its Global long-short and Eurovest funds returned 6.5% and 9.2% respectively) and Arundel (its Premier fund returned 8.4%). They specialize in equity long-short, along with Permal and Collins Stewart, who include long-only in their funds.”
However, the top-performing dollar-denominated fund of funds was GAM Multi-Emerging Markets, with a return of 9.1% for the three months to March 30. Mr. Goldsmith noted GAM fund manager Kier Boley’s increased relative success in capturing upside and his outperformance of Permal Emerging Markets, which returned 8%. This reversed Permal’s historic outperformance of GAM Multi-Emerging Markets.
