Hedge Fund Performance: Do 1.604 Percent Gains in June Indicate That We Have Turned the Corner?

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Cogent Dynamic Averages show all hedge funds up 1.604% in June, and 1.497% YTD. But three declining months and three positive months so far this year indicate that the current roller-coaster ride is probably not yet over.

The first half of the year 2005 has been a roller-coaster ride for alternative investments. Roller-coasters may be good for amusement parks but we don't want sudden ups, downs and sideways turns in our investments. Fortunately, for the year to date overall performance has been comfortably positive with all alternative investments in the CogentHedge database reporting results through June (currently over 2250) showing an average gain of 1.604%. Most of the 50+ investment strategies tracked by CogentHedge reported monthly - and year-to-date - results in the positive range. While eight strategies (convertible arb, credit spread arbitrage, global fixed income, aggressive FOFs and several trading strategies) are still down for the year to date, all other strategies are in positive territory.

Current data can be found at http://www.cogenthedge.com/home/inv_strategy.asp.

Performance by investment strategy and sub-strategy is as varied as the policies of the funds themselves. A quick review of the Cogent Dynamic Averages shows that Emerging Market Equity strategies are leading the pack - up +8.150% for the year - while the Convertible Arbitrage strategy remains the single worst-performing category for the year: down -6.744% through June. Convertible Arb funds (with 52 reporting as of this moment) are up +1.063% for the month of June. We analyzed this investment strategy in a prior report.

Taken in aggregate, alternative investments have posted three positive months and three negative months so far this year. Results range from a high of 1.605% in June to a low of -1.456% in April. Rollercoaster, indeed!

The Cogent Dynamic Averages allow us to delve into these numbers. For instance, what is the range of reported June results by individual strategy? The largest standard deviations by investment strategy for the month of June 2005 are as follows:

Standard Deviation of Reported June returns

by Investment Strategy:

Options strategies: 9.245%

Currency Trading: 5.116%

Futures Programs: 4.943%

Aggressive FOF: 3.550%

Emerging Markets Equity: 3.301%

Global Macro: 3.132%

Global Fixed Income: 2.955%

Corporate Restructuring: 2.619%

ALL FUNDS: 2.737%

For more information, come to http://www.cogenthedge.com.

David Slavin

Managing Director


Cogent Investment Research LLC

+1 609 945-0629



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David Slavin