George Van

Overall Hedge Fund Performance Strong for Month, Year to Date

Hedge funds by and large performed well in April’s rough and tumble markets. The Average U.S. Hedge Fund outperformed most of the major indices with a –2.4% drop, while the Average Offshore Hedge Fund fell only -3.3%. Overall, both the Average U.S. and Offshore Hedge Fund Indices remain positive for the year, with the average U.S. fund posting a 7.5% net gain and the average offshore fund showing a net increase of 4.2%. In comparison, the S&P 500 and the NASDAQ, which dropped -3.0% and –15.6% respectively in April, have lost -0.8% and -5.1% through April. The Average Equity Mutual Fund remains slightly positive for the year at 0.6%.

Certainly not all hedge funds escaped April completely unscathed; however, over 60% of the funds in VAN’s indices outperformed the S&P 500 and more than 40% actually posted gains in April. In fact, the top five U.S. funds reported an average return of 46.8%, and the top 20 U.S. funds reported an average gain of 19.6%.

As one might expect, Short Sellers emerged as the big winners in April. The Average U.S. Short Seller returned 19.2% net while the Average Offshore Short Seller returned 16.8%. Market Neutral-Arbitrage funds came in second this month, providing capital preservation and slight appreciation with a 1.7% net return for Offshore funds and a 0.3% return for U.S. funds. Most of the other strategies posted slight losses in April, with some of the hardest hit being Macro and Aggressive Growth. On a year-to-date basis, however, all but two of the 14 U.S. and five of the 13 offshore strategies have posted gains.

Currently, the NASDAQ, the Dow and the S&P 500 once again are posting losses for the month. Investors remain unsettled due to unresolved inflation and rate increase issues. According to VAN’s research, hedge funds can significantly preserve capital during down markets. During the eight quarters that the S&P 500 was negative since 1990, the Average Global Hedge Fund lost only –3.6% cumulatively while the S&P lost a total of -33.8%, making hedge funds a sensible choice in the face of today’s uncertain market.

For April, the best performing strategies were U.S. Short Sellers, Offshore Short Sellers, and Offshore Market Neutral-Arbitrage that had net returns of 19.2%, 16.8% and 1.7% respectively. For the year to date, U.S. Market Timers top the list with a 14.2% net return. U.S. Opportunistic and Offshore Aggressive Growth funds follow with 12.7% and 11.3% net returns, respectively.

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