A Broad View of Hedge Fund Performance Reveals Plenty of Strong Performers, Low Leverage and Additional Myth-Busters

5 December 2008

PerTrac Financial Solutions today announced the results of a new review of hedge fund performance, leverage, and liquidity, which provides granular insight into the industry for the year-to-date.

Based on an analysis of the performance of more than 4,500 funds, the HedgeFund.net-PerTrac Online Universes found that while the average fund is down -10.83% for the year-to-date through October, many hedge funds posted strong gains so far this year. A year-to-date examination of the distribution of reported hedge fund returns (from highest to lowest) reveals a gain of 27.08% at the 95th percentile, and gains of 13.85% at the 90th and 5.11% at the 80th percentiles.

“It’s a mistake to judge the entire hedge fund industry by a single, average number,” said Meredith Jones, Managing Director of PerTrac Financial Solutions. “Once you get away from the average performance numbers, it is clear that a significant number of funds have delivered strong returns this year. In fact, even down to the 70th percentile of hedge funds, performance is essentially flat, (-0.27%) through October, meaning that in our sample alone, more than 1,300 funds were either flat or positive for the year through October.”

In contrast, top mutual funds fared far worse losing 23.46% at the 90th percentile and losing 27.42% at the 80th percentile. Among the worst performing hedge funds, the year-to-date return at the 20th percentile is -27.24%, and -39.04% at the 10th percentile. The biggest losers among mutual funds posted even greater losses, with returns at the 20th and 10th percentiles of -41.59% and -46.02%, respectively. In comparison, the S&P 500 (DRI), Dow Jones Industrial Average and NASDAQ dropped -32.84%, -28.18% and -35.11%, respectively.

“Managed Futures/CTA funds have been the clear winners this year through October, posting an average return of 14.01%, with impressive gains of 46.00% and 31.88% at the 90th and 80th percentiles,” said Jones. “In fact, one must look below the 20th percentile of the CTAs in our sample to find funds that posted double-digit losses. Certainly, Managed Futures/CTAs are the most common strategy in the top 5% of funds reporting in our sample. Nonetheless, looking at the top five percent of funds reveals a diverse mix of strategies posting strong gains through October, including long/short equity, short bias, macro, multi-strategy, fixed income, and fund of funds, proving that success or failure in this market has not been strategy-specific.”

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