Pooled Fund of Hedge Funds Struggle in First Quarter of 2008 With Lowest Quarterly Return in Five Years
05/06/2008 10:09
PR Newswire
LONDON, June 5 /PRNewswire/ --
- Fund of hedge fund managers outperformed UK and Overseas Equity pooled
funds
Statistics released today by BNY Mellon Asset Servicing show that pooled
fund of hedge funds failed to achieve positive returns during the first
quarter of 2008. Over this period the median return for these funds was -4.0,
the lowest return that we have seen for these funds since BNY Mellon Asset
Servicing started to measure pooled fund of hedge fund performance in 2003.
This is the third consecutive quarter that pooled fund of hedge funds failed
to achieve a quarterly positive return.
Despite seeing a relatively weak performance during Q1 2008, pooled fund
of hedge fund managers still outperformed other key investment sectors
including UK and Overseas Equity pooled funds, which returned -9.7% and -9.5%
respectively. Pooled fund of hedge funds were however, outperformed by
Property (-3.5%), UK Bonds (-1.1%) and Cash (1.3%).
Commenting on the results, Alan Wilcock, Performance and Risk Analytics
Manager at BNY Mellon Asset Servicing, said: "Along with one of the worst
starts ever to a year for the equity markets, pooled funds of hedge funds
also suffered from negative returns in January and March, producing the
lowest quarterly return we have seen."
Despite a shaky start to the year, some stronger results in earlier
periods meant that fund of hedge funds did make some small gains over a one
year period with a median return of 1.7%. Pooled fund of hedge fund managers
also outperformed key sectors over this period, in particular UK and Overseas
Equity funds which returned -8.8% and -1.9% respectively. Over longer term
periods, pooled fund of hedge fund results were even stronger, and over three
and five years the median fund returned 7.5% p.a. and 8.2% p.a. respectively.
Over three years to 31 March 2008, pooled fund of hedge funds were
outperformed by both UK (8.8% p.a.) and Overseas Equity (10.6% p.a.) pooled
funds. BNY Mellon Asset Servicing's analysis does however show that the
volatility of returns over this period (as measured by the median standard
deviation) was significantly lower for fund of hedge fund managers. The
standard deviation for pooled fund of hedge funds was 5.3% p.a., compared
with 10.1% p.a. and 10.9% p.a. for UK and Overseas Equity funds. Over this
period, pooled fund of hedge fund managers achieved an outperformance of 4.1%
against UK Bond pooled fund managers, with broadly similar levels of risk;
the median standard deviation of these funds was 4.6% p.a.
Each quarter, BNY Mellon Asset Servicing publishes results from its
pooled fund of hedge funds universe which consists of multi-strategy funds of
hedge funds. These offer a route into alternative investments for UK pension
schemes and a means of generating returns, whilst reducing overall fund risk
through diversification. Hedge fund strategies can be broadly classified as
directional, event driven and non-directional. Directional strategies seek to
forecast and exploit broad market trends, while event driven strategies seek
to anticipate and exploit events such as mergers or corporate restructurings.
Non-directional strategies generally seek to take advantage of pricing
inefficiencies.
As at 31 March 2008, the average fund of hedge funds held 48.4% of its
assets in directional strategies, 13.1% in event driven strategies, 17.2% in
non directional strategies and 21.4% in other (unspecified) strategies and
cash.
BNY Mellon Asset Servicing's fund of hedge funds universe currently
covers 19 separate funds with over pounds Sterling 4.9 billion in assets.
Notes to editors
BNY Mellon Asset Servicing offers clients worldwide a broad spectrum of
specialised asset servicing capabilities, including custody and fund
services, securities lending, performance and analytics, and execution
services. BNY Mellon Asset Servicing provides services through The Bank of
New York, Mellon Bank, N.A. and other related companies.
The Bank of New York Mellon Corporation is a global financial services
company focused on helping clients manage and service their financial assets,
operating in 34 countries and serving more than 100 markets. The company is a
leading provider of financial services for institutions, corporations and
high-net-worth individuals, providing superior asset management and wealth
management, asset servicing, issuer services, clearing services and treasury
services through a worldwide client-focused team. It has more than US$23
trillion in assets under custody and administration, more than US$1.1
trillion in assets under management and services US$12 trillion in
outstanding debt. Additional information is available at bnymellon.com.
Web site: http://www.bnymellon.com
Louisa Bartoszek, +44-20-7163-2826, louisa.bartoszek@bnymellon.com, for BNY Mellon Asset Servicing
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