New York, March 9, 2005-
After getting off to a slow start in 2005, hedge fund performance as measured by the S&P Hedge Fund Index (S&P HFI), finished the month of February up 0.83% to produce a positive year- to-date return of 0.36% for the index, Standard & Poor’s announced today. Also bouncing back from a sluggish January were the S&P Directional/Tactical and S&P Event-Driven Indices, returning 0.67% and 1.53% respectively for the month. The S&P Arbitrage Index also ended February on a positive note, returning 0.29% during the month. Standard & Poor’s is the world’s leading provider of independent investment research, ratings and indices.
Within the S&P Directional/Tactical Index, equity managers were the largest gainers in February. The S&P Equity Long/Short Index moved up 1.80% during the month. Strong stock selection and a trend toward more concentrated holdings benefited many managers as equity markets continued to rally on improved balance sheets and earnings. The S&P Managed Futures Index, comprised of 14 predominantly medium- to long-term trend followers, ended the month in slightly negative territory, down 0.14%. Gains in energy and index futures were offset by losses in long grains and government bond positions. Currencies profit and losses were split almost evenly as many trading systems either hit stops and reversed positions or went to neutral as the U.S. dollar began to weaken against the majors.
The S&P Arbitrage Index gained 0.29% during February, bringing its year-to-date return to 0.60%. In addition, its three underlying strategies all registered positive returns. “The month of February witnessed a continued recovery in the Equity Market Neutral strategy, particularly in Europe,” says Charles Davidson, Senior Hedge Fund Specialist at Standard & Poor’s. “Many Convertible Arbitrage managers continue to find difficulties in this low volatility environment resulting in small increases in leverage. Results in fixed income were mixed with yield curve traders outperforming those in the mortgage-backed space.”
The S&P Event-Driven Index gain of 1.53% for the month has resulted in the second best, year-to-date return (+1.47%) among the S&P Hedge Fund Indices. Distressed and Special Situations registered a strong month as upward movement in oil prices had a strong positive impact on many of their natural resource holdings. “Merger Arbitrage managers are finally starting to see opportunities in what has become an increasingly favorable environment,” adds Davidson. “The positive tone in M&A activity is reflected in the upward price moves on acquirers’ stocks after announcements.”