Studying the last four years of hedge fund performance ending-June 2011, we at FPM are able to notice strategic investment trends, as depicted by various hedge fund strategies and their dynamic risk metrics.
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In Numbers: All Hedge Fund Strategies:
(or email FPM to receive Word format version: Kristian)
Based on above chart and table we can identify many investing trends. In the table the green and yellow highlights reflects best and worst performance metric under consideration.
- The top compounded performance of Relative Value Fixed Income Asset Backed strategies, gaining 40% over 4-Years to end-June 2011, might be unexpected and warrants analysis. Structured credit isn’t toxic after all! (See FPM's Credit Markets @Workout Inflexion Point).
- Emerging Markets Russia / Eastern Europe Index cumulatively lost 19% versus 12% loss for the S&P 500, deserves scrutiny over use of hedge fund label - more likely “a beta masquerade”. Latin America-focused emerging markets hedge funds did better, up 22%.
- Macro hedge funds (especially Systematic Diversified) offered the best protection against the worst of the credit crisis, down 0.6% in the worst 12-month period. The aforementioned proxy on Russia/Eastern Europe Index lost 88% between Mar’08 and Feb’09.
- Of Equity Hedged strategies, Short Biased Index as expected had the least correlation to the general market as proxied by S&P 500 and also the Hedge Fund Composite Index.
- FPM’s forward looking analysis suggests directional strategies may benefit most from on-going debt-overhang workout, reform and confidence-restoration trends (e.g. the Russian / Eastern Europe sub index has bounced back 47% over 2-years to end June’11).
- Due to the effects of currency fluctuations, the hedge fund weighted composite index performance, based in Swiss Francs (CHF), is half that of the US-dollar composite index. The appreciation of the Swiss currency to the US dollar diminishes dollar-based returns.
The four-year window of observation was chosen as it coincides with when the FPM author last practised in institutional investments, allocating treasury money to hedge funds.
During this sojourn, as a self-starter initiative, K Kristian Siva is designing and developing the Fund Portfolio Management (FPM) programme for Alternative Investments enterprise implementation.