Long/Short Hedge Fund Strategies At the midpoint of 2015, hedge funds as a group have outpaced widely quoted US large capitalization equity market indexes. Through June 30, 2015, the S&P 500 Index is up 1.2% and the Dow Jones Industrial Average is flat at 0.0% for the year, while the Credit Suisse Hedge Fund Index…

Many fundamental long/short hedge funds gravitate toward small- and mid-cap equities on the long side and focus on larger-cap equities on the short side. During the last three quarters of 2014, the larger cap S&P 500 meaningfully outperformed the smaller cap Russell 2000® (cumulative returns of 11.7% versus 3.7%, respectively), creating strong headwinds for investors…

In the fourth quarter, many of the trends that had played out throughout 2014 continued, and in some cases accelerated. Like most quarters this year, on the surface, fourth quarter hedge fund returns (0.7% for the Credit Suisse Hedge Fund Index and 0.5% for the HFRI Fund-Weighted Composite Index) look disappointing when compared to widely…

Broadly speaking, hedge funds were flat for the quarter (the Credit Suisse Hedge Fund Index returned 0.6% and the HFRI Fund Weighted Composite Index, -0.1%). Performance in many equity markets was much worse for the quarter, with the Russell 2000® returning -7.4%, MSCI Europe, -7.0%, and MSCI Emerging Markets, -3.4% (all in US$ terms). Larger-cap…

The same quiet economic and financial environment, with strong equity markets, that muted returns for hedge funds in the first quarter continued during the second. While the US stock market rallied almost 5%, the yield on the US ten-year dropped 20 bps and the yield curve essentially moved in parallel. Not surprisingly, the VIX declined…

Market Results First quarter results for most equity markets were generally positive, if muted, but the seemingly benign final numbers understated a relatively turbulent first quarter. Most major equity markets opened the year with a meaningful drawdown but snapped back aggressively in February. March produced modest returns in total, but under the surface there was…