“The unique added value of hedge funds is their ability to produce attractive risk adjusted returns across a range of asset classes over a short and long term investment horizon, independent of broad market trends,” said Oliver Schupp, President of Credit Suisse Index Co., Inc. “Hedge funds, as represented by the Credit Suisse/Tremont Hedge Fund Index, maintain exposure to a range of asset classes making them a more balanced investment vehicle compared to traditional indices. Therefore, as a diverse portfolio of asset classes, a comparison to a traditional market index that represents a single asset class is misleading and inaccurate.”
Some of the findings in The Hedge Fund Industry Rocks Both Bear and Bull Markets include the following:
- As 2006 came to a close, hedge funds used a diverse range of strategies and unique trading styles to profit from market trends resulting in nine out of the ten sectors of the Credit Suisse/Tremont Hedge Fund Index producing positive results.
- Despite market downtrends in May and June combined with the collapse of one of the largest hedge funds that was ever recorded in history, hedge funds continued to attract a healthy level of assets under management.
- In their quest for alpha, hedge funds do not seek strong correlation with global equity markets thus enabling divergence from market trends. The Credit Suisse/Tremont Hedge Fund Index suffered almost zero drawdown in the past ten years, ending December 2006. In contrast, during the bear markets of 2001 through 2003, most major equity markets indices on average lost over 40%.
- Hedge funds seek positive returns regardless of market conditions. This is exhibited in the correlation between the Credit Suisse/Tremont Hedge Fund Index and MSCI World that declined in the aftermath of the tumble in the technology sector in 2000 and the global recession that followed. This decoupling effect enabled hedge funds to protect capital as well as to yield a reasonable gain for investors.
Credit Suisse/Tremont industry commentaries and publications are available on the Research page in the News & Press section of our website, www.hedgeindex.com.
Oliver Schupp, Credit Suisse, telephone 212 538 8179, firstname.lastname@example.org
Meg Bode, Bode Associates, telephone 516 869 6610, email@example.com
John Gallagher, Credit Suisse, telephone 212 325 0932, firstname.lastname@example.org
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