In Hedge Funds, Accentuate The Positive

The trouble with media is that they tend to thrive on the negative, always trumpeting when things are bleak but rarely heralding when things bright. Take hedge funds. Based on media reports for most of the year, the industry has been going through a grim time, with hedge funds struggling to generate returns in double digits. No one can deny that some dogs of hedge fund strategies had a rough time, but in reality, the parts are often greater than the sum of its whole. Take the Credit Suisse/Tremont Hedge Fund Index. It was up a healthy 1.77% in October, bringing the year-to-date totals to 9.55%. At this rate, the index should end above the magical 10% barrier, a nice comeback from the doldrums of earlier this year and beyond the 2005 finishing line. What’s more, more than half of the substrategies are poised to end 2006 with respectable returns: Already emerging markets is at 13.58%, event driven multi-strategy at 11.90%, distressed at 11.89% and convertible arbitrage at 11.44%. Certainly, wrongheaded bets sunk a number of funds, especially in the energy sector, and caused nervous voices to declare the hedge fund sky is falling. So the next time someone comments on the dire state of hedge funds, remember to point to the positive. By the way, he Credit Suisse/Tremont Investable Hedge Fund Index was up 0.93% in October, bringing it to 6.44% year to date, by its emerging markets sector invest index was up a boffo 2.70% for the month, 15.96% YTD.