In performance terms, the global hedge fund industry is stuck in a hard place — a little under half way between that ancient asset class, sovereign debt, and plain vanilla stock markets.
That’s what the latest figures from MSCI Barra, the indices and risk management business, say. During the year to end-September its MSCI Hedge Fund Composite Index managed a 6 per cent advance, while the asset-weighted version of the same index proved even less impressive at 5.9 per cent.
That compares with a 10.8 per cent advance in the MSCI World Equity Index during the period and a 4.3 per cent gain by its Sovereign Debt Index.
Comparisons were even worse during the third quarter, with the hedge funds — up 0.5 per cent, or 0.7 per cent asset weighted — lagging behind both equities (4.5 per cent) and sovereign debt (1.5 per cent).
Taking a long view, however, tracing back to the bursting of the dot com bubble, hedge funds have still outperformed both sovereign debt and equities on an annualised basis through from December 2000 to September 2006.
And, crucially for the industry, overall asset flows have remained positive, with $5.8bn flowing into hedge fund tracked by MSCI during the third quarter, producing a year-to-date total of $31.5bn.