Yes, it’s time for another measurement of hedge fund performance. Barclay Hedge Fund Index said funds lost 0.91% in June, the worst in nine months.
Unless it’s the worst in two years, as Hedge Fund Research says, reporting a drop of 1.3%.
Unless it wasn’t all that bad, as SS&C GlobalOp suggests in its June report, in which hedge funds edged down 0.65%.
Everyone agrees the S&P 500 has risen year-to-date 1.23%; hedge funds are up more. We’ll leave it at that. (BarclayHedge says they’re up 3.52%.)
Everyone also agrees that Greece and China were not good for performance — although we always thought volatility was good for traders. The biggest winner still appears to be Biotech finds. The Barclay’s Healthcare & Biotechnology Index climbed 12.6%.
“Macro funds were hit with losses on several fronts. Price declines in equity indices, emerging markets, high yield credits, and the U.S. Dollar made for a challenging month,” says Sol Waksman, founder of BarclayHedge.
So why the discrepancy in performance numbers? The biggest issue hedge fund data has is that it’s all self-reported. Not that hedge funds aren’t totally on the up-and-up, but they may leave some data open to interpretation when they report it. Services like HFR, Barclay, and SS&C only share about 60% to 70% of the same firms and data. “While we all draw from a similar universe of hedge funds, we don’t draw from the same universe of hedge funds,” says Waksman.
Even assets that look the same may be quite different. Equity long short is a popular category for hedge funds. Barclays breaks up this category into equity long short and equity long bias, depending on what percentage exposure the funds have. Other trackers likely don’t break it up this way, making Barclays measures for equity long short smaller than other firms, says Waksman.
“There is no best [index],” says Waksman. “If you want a better estimate, take two, three, or four of them.”
“We’re not there to say, ‘hey this is the best’,” he adds. “We’re more there to save the time of managers,” by offering a filtered look at hedge funds and their performance.
This discrepancy between funds is really unique to the alternative world that is more gray, and relies on self-reporting. Mutual funds, for instance, are required to report their holdings and performance, says Michelle Swartzentruber, senior research analyst at Morningstar. Morningstar data may differ a tiny bit from, say, Lipper, but it’s going to be much more similar data across the board than with hedge funds.
Photo:Moni Sertel