Cogent Dynamic Averages of Hedge Fund Investment Strategies Post Strong Gains in July: up 1.79%

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With over 2450 alternative investments reporting results for the month of July 2005, the average hedge fund has advanced +1.796% for the month. Following on the heels of a +1.468% gain in June, alternative investments are ahead by +3.215% for the year to date.

Cogent Investment Research LLC, the operator of the free CogentHedge online alternative investment information and analysis resource for investment professionals worldwide (http://www.cogenthedge.com), reports that as of the tenth business day of August 2005, and with over 2450 entities now reporting results for the month, the Cogent Dynamic Averages are as follows:

Commentary:

Current Hedge Fund Performance: The Tortoise or the Hare?

A principal trait of alternative investments is their ability to capture gains in all market cycles. Hedge funds should be able to maintain consistent - but not necessarily large - positive growth month after month. However, different investment strategies excel at different objectives: a strategy that may generate outsized short-term gains in a particular month are less stellar over the long-term. For instance, Emerging Markets Equities, as the second best performing investment strategy in July, returned 3.813% for the month. Consistency? Time Window Analysis, and specifically the '% Profitable Periods' statistic for this strategy shows that it doesn't consistently post positive returns until the rolling two-year time frame; a long-term approach is obviously required for this strategy even though the average two-year gain is nearly 60%. On the other hand, emerging markets debt strategies gained only 1.220% for July but are consistently positive at the rolling six-month period - and show an average two-year gain of 32%.

At what point do various investment strategies hit 100% positive gains?

% Positive Gains by Rolling Time Period

=======================================

July Net % Gain

===============

All Funds

1.796%

Emerging Markets Equity

3.813%

Emerging Markets Debt

1.220%

Pairs Trading

4.580%

Index Arbitrage

3.388%

Industry/Sector Specialist L/S

3.374%

Single-Mgr x/Futures Mgrs

2.119%

Diversified Funds of Funds

1.663%

Fixed Income Arbitrage

1.435%

Managed Futures

0.316%

Options/Derivatives Arbitrage

-0.348%

% Positive Gain by Rolling 3-Month Period

=========================================

All Funds

81.538%

Emerging Markets Equity

75.385%

Emerging Markets Debt

95.385%

Pairs Trading

87.692%

Index Arbitrage

63.077%

Industry/Sector Specialist L/S

76.923%

Single-Mgr x/Futures Mgrs

81.538%

Diversified Funds of Funds

80.000%

Fixed Income Arbitrage

95.385%

Managed Futures

66.154%

Options/Derivatives Arbitrage

84.615%

% Positive Gain by Rolling 6-Month Period

=========================================

All Funds

93.548%%

Emerging Markets Equity

77.419%

Emerging Markets Debt

100.000%

Pairs Trading

87.097%

Index Arbitrage

66.129%

Industry/Sector Specialist L/S

83.871%

Single-Mgr x/Futures Mgrs

91.935%

Diversified Funds of Funds

91.935%

Fixed Income Arbitrage

100.000%

Managed Futures

77.419%

Options/Derivatives Arbitrage

96.774%

% Positive Gain by Rolling 12-Month Period

=========================================

All Funds

100.000%

Emerging Markets Equity

92.857%

Emerging Markets Debt

100.000%

Pairs Trading

100.000%

Index Arbitrage

62.500%

Industry/Sector Specialist L/S

85.714%

Single-Mgr x/Futures Mgrs

100.000%

Diversified Funds of Funds

100.000%

Fixed Income Arbitrage

100.000%

Managed Futures

92.857%

Options/Derivatives Arbitrage

100.000%

% Positive Gain by Rolling 18-Month Period

=========================================

All Funds

100.000%

Emerging Markets Equity

98.000%

Emerging Markets Debt

100.000%

Pairs Trading

100.000%

Index Arbitrage

72.000%

Industry/Sector Specialist L/S

96.000%

Single-Mgr x/Futures Mgrs

100.000%

Diversified Funds of Funds

100.000%

Fixed Income Arbitrage

100.000%

Managed Futures

98.000%

Options/Derivatives Arbitrage

100.000%

% Positive Gain by Rolling 24-Month Period

=========================================

All Funds

100.000%

Emerging Markets Equity

100.000%

Emerging Markets Debt

100.000%

Pairs Trading

100.000%

Index Arbitrage

77.273%

Industry/Sector Specialist L/S

100.000%

Single-Mgr x/Futures Mgrs

100.000%

Diversified Funds of Funds

100.000%

Fixed Income Arbitrage

100.000%

Managed Futures

100.000%

Options/Derivatives Arbitrage

100.000%

Alternative investments overall are showing healthy performance gains. Only four investment strategies are still in negative territory for the year to date: Convertible Arbitrage (-4.820%), Credit Spread Arbitrage (-3.288%), Managed Futures (-1.689%) and Options Strategies (-0.942%). All other investment strategies tracked by CogentHedge reported monthly results in the positive range. The top six strategies for the month are as follows:

July 2005

% Gain

=========

All Funds

1.796%

Pairs Trading

4.580%

Emerging Markets Equity

3.813%

Index Arbitrage

3.388%

Industry/Sector Specialist L/S

3.374%

Value Strategies

3.129%

Growth Strategies

3.128%

YTD 2005

% Return

========

All Funds

3.215%

Pairs Trading

7.508%

Emerging Markets Equity

12.598%

Index Arbitrage

6.499%

Industry/Sector Specialist L/S

4.899%

Value Strategies

5.339%

Growth Strategies

5.248%

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

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

David Slavin

Managing Director

Cogent Investment Research LLC

+1 609 945-0629

http://www.cogenthedge.com

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