Non-equities hedge funds post gains

Investors in Australian hedge funds targeting asset classes outside equities made
gains during January after suffering significant falls during calendar 2008.
Australian Fund Monitors' (AFM) report for January showed the local hedge fund
sector posted a 0.3 per cent return, defying a 4.88 per cent drop by the ASX 200
index for the month.
Over half of the 210 hedge funds surveyed by AFM made positive returns, with the
best returns from funds invested in asset classes outside equities, AFM said on
Tuesday.
AFM's chief executive Chris Gosselin said the result was expected, especially given
the five per cent slump in equity markets during both January and February.
"It's pretty difficult to make money in that environment in an equity fund even if
you are a hedge fund and you've got some short cover."
In 2008 hedge funds in Australia lost 17 per cent on average, whereas the market
lost 40 per cent.
"Last year's market was exceptionally difficult and the amount of hedging cover -
unless you were market neutral - probably wasn't enough to save you from having some
negative performance," Mr Gosselin said.
"But you still lost less than half than your long-only counterparts."
On average, funds invested in global diversified assets posted an eight per cent
return during January, while funds invested in the credit markets returned 7.5 per
cent and funds invested in managed futures returned over three per cent, AFM said.
Managed futures take long and short positions in futures contracts, government
securities and options on futures contracts.
On average, non-equity-based funds gained 1.39 per cent during January, while funds
of funds returned 2.37 per cent for the month.
Fund of funds are funds using an investment strategy of holding a portfolio of other
investment funds rather than investing directly in shares, bonds or other asset
classes.
By contrast, funds invested in equities lost between 0.36 per cent and four per cent
during January.
Hedge funds have demonstrated that they were highly defensive instruments that had
softened the blow for investors caused by highly volatile equity markets, AFM said.
"Although the disclaimer on nearly every financial product includes the words 'past
performance is not an indicator...' the reality is that when it comes to quality
managers they tend to produce consistently good returns," AFM said.
The January gains for non-equity-based funds came after they dropped significantly
during calendar 2008.
This included an 11.59 per cent fall for Macquarie Group's High Alpha Commodities
Fund during calendar 2008 followed by a 3.59 per cent gain during January, and
Select Asset Management's Gold fund which lost 49.71 per cent during calendar 2008
but surged 17.44 per cent during January.
Among fund of funds, HFA Accelerator Plus Ltd, managed by HFA Asset Management, fell
74.24 per cent during calendar 2008 but jumped 24.95 per cent during January.
Other fund of funds posted gains of between 0.01 per cent and 5.96 per cent during
January, AFM said.