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Category:
Investment News /
Investments /
Nedgroup
/ August 2006
Local hedge funds provides downside protection
Volatility
in the local markets remained high during July and the FTSE/JSE All
Share Index lost 1.5%.
It
was also a difficult month for many of the 37 funds participating in
the Nedgroup Hedge Fund Review, which lost, on average, 0.1% after
fees during July, reports Lizelle Steyn, Manager: Alternative
Investments at Nedgroup Investments. The bond market gained 0.7%
during the month.
“The best performing hedge fund category for the month was the
long/short category, delivering 0.8% on average. Within this
category the 36ONE Hedge Fund delivered the highest return for the
month: 2.4%.
The
fixed interest category produced a return of 0.3%, the market
neutral category a slightly negative return (-0.04%), while the
trading category lost 1.1%, on average.
Within the fixed interest category, market neutral and trading
categories Coronation’s Granite Fixed Income Fund (0.9%), the
Fairtree Market Neutral Fund (2.9%) and the Gryphon Doulos Fund
(2.0%) were the respective top performers.
“Looking at nominal returns over the longer term (two years), the
funds participating in the Review delivered 24.9% p.a. on average,
against the FTSE/JSE All Share Index’s 46.4% p.a. Over the same
period the best performing fund was DWT Securities’ Badger Quant
Strategy Fund with a return of 54.2% p.a.
Over one year the funds in the Review yielded 22.1% on average; over
this period the Badger Quant Strategy Fund was also the best
performer with a return of 63.3%. For the year to date, the funds
submitting data to the Review returned 9.7%. Over this period the
Top-Flite Eagle Fund delivered the highest return of 22.8%.” says
Steyn.
Steyn points out that most hedge fund managers do not target the
highest possible nominal returns, but rather the highest possible
risk-adjusted returns. “Looking at the Sharpe and Sortino ratios for
performance over the past two years, the Fairtree Market Neutral
Fund offered the highest monthly returns for the accompanying
volatility, whereas the Peregrine Pure Hedge Fund offered the
highest returns for the accompanying downside volatility.”
“The Bond Exchange of SA (BESA) and Clade Investment Management (Clade)
launched another South African hedge fund index during August. It
includes 20 South African hedge funds and differs from the Nedgroup
SA Hedge Fund Index in the following ways:
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Clade requires funds to manage at least R30m to qualify for
inclusion; Nedgroup Investments sets its minimum at R1m (the
same as the minimum required to register a conventional unit
trust fund).
-
Clade would normally include only funds that are administered by
an independent, third-party administrator, whereas Nedgroup
Investments has no specifications regarding fund administration.
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The Nedgroup SA Hedge Fund Index attempts to be as
representative as possible and therefore also includes hedge
funds which have been running for years and are now closed to
new investments; Clade include only currently investable funds.
-
Clade requires a performance history of at least 12 months for
inclusion. Nedgroup Investments prefers funds to start
submitting returns as soon as possible to minimise the
self-selection bias of the index.
-
Clade does not include registered CIS funds. Nedgroup
Investments would include FSB registered funds, such as the
Allan Gray Optimal Fund, which actively utilises derivatives to
create significant short positions in the portfolio.
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Clade’s hedge fund index tracks the performance of funds back to
March 2004; Nedgroup Investments tracks performance from January
2001.
-
Clade only includes funds, which provide monthly liquidity to
investors, whereas Nedgroup Investments does not have any
restrictions around fund liquidity.
Steyn emphasized that the funds included in BESA and Clade’s index
will always differ greatly from the funds included in the Nedgroup
SA Hedge Fund Index, the greatest difference being that the Nedgroup
SA Hedge Fund Index aims to be as representative as possible of the
local hedge fund industry, whereas BESA and Clade’s index attempts
to emulate the investable universe.
Source: ITInews – Insurance
Times and Investments Online
www.itinews.co.za
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