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Opalesque: Emerging Hedge Fund And CTA Managers Still In Positive Territory Year To Date, Returned 60% Since 2009

Date 02/11/2011

Opalesque Ltd., a leading provider of online information services to the alternative investment industry, today announced the official launch of the Opalesque Solutions Emanagers Database and Index series. The Opalesque Emanagers Total Index is based on currently 293 emerging hedge fund and managed futures fund managers listed in the Emanagers database, the industry's only database dedicated exclusively to hedge fund management firms less than 48 months old and with assets under management of less than $600 million at the time of the firm's inception.

The Emanagers Total Index, currently consisting of 198 hedge funds and 94 managed futures funds, lost 1.91% in September and is up 0.37% year to date. Since January 2009, the index has performed exceptionally well, returning 34.5% in 2009 and 18.73% in 2010, adding to a cumulative return of 60.29%. Funds listed in the Emanagers Database thus managed to outperform both the HFRI Fund Weighted Composite Index and the MSCI World Index every year since 2009.

To provide a more detailed picture and allow for reasonable comparison, Opalesque also created two sub-indices, namely the Emanagers Hedge Fund Index and the Emanagers CTA Index. Our data shows that although managed futures strategies and hedge fund strategies tend to perform almost independently in normal market conditions, the correlation changes to a strong negative in times of market turmoil, like the ones experienced in late 2008 to early 2009, as well as the summer months of 2011. This provides strong evidence that a mix of hedge fund and managed futures strategies is a very useful portfolio diversifier in the long run.

Performance analysis of our sub-indices slightly changes the picture in the short run: Emerging hedge fund managers underperformed the HFRI year to date, with a cumulative loss of -5.32% compared to -4.85%. Interestingly, this underperformance arose in the months of July to September this year. We assume the reason for the bigger drawdown this summer is the overall higher performance volatility of Emanagers hedge funds (7.94) compared to HFRI funds (6.46).

In the long run, however, Emanagers hedge funds outperformed the HFRI in 14 of the 21 months tracked Opalesque so far, returning 17% in 2010 and 37.6% in 2009, adding to a cumulative return of 52.5%, compared to 25.9% for the HFRI. This supports previous empirical research (e.g. Neuberger Berman (2011) and Infiniti (2009)) showing that emerging hedge fund managers tend to outperform their established peers.

Emanagers managed futures funds had an outstanding year, returning 12.2% through September. This comes after a performance of 19.2% in 2010 and 20.5% in 2009. In a nutshell, Emanagers managed futures funds have outperformed the Barclay CTA Index every year so far.

 

Performance (in %), Volatility and Equity Market Beta (in %)

Index

Sep 2011

YTD

2010

2009

Total since Jan 2009

Volatility

Equity market beta

Emanagers Total Index

-1.91

0.37

18.73

34.51

60.29

7.94

35

Emanagers Hedge Fund Index

-3.58

-5.32

17.07

37.59

52.51

8.36

48

Emanagers CTA Index

1.07

12.20

19.15

20.52

61.12

14.27

17

               

HFRI Fund Weighted Composite

-3.43

-4.85

10.24

20.01

25.89

6.46

38

MSCI World

-8.45

-13.75

9.40

27.07

19.90

16.39

100

The Opalesque Solutions Emerging Manager Database can be accessed here:
www.opalesquesolutions.com/emanagers/