The Average U.S. Hedge Fund lost ?1.1% net in February. The average offshore-domiciled hedge fund, however, stood its ground with a flat return for the month. Among the major stock market averages, only the Dow was positive last month, with the S&P 500 dropping ?1.9% and the NASDAQ shedding ?10.5%, its worst showing since last September.
February was a tough month but, in general, hedge funds succeeded in outpacing the market. About 49% of reporting hedge funds experienced a net gain in February, and over three-quarters beat the S&P 500. As expected, Short Selling was the most successful strategy, with stocks weighed down last month by fallout from the Enron scandal, mixed earnings reports, and a decline in consumer confidence. U.S. Short Sellers averaged a 3.3% net gain for the month while Offshore Short Selling earned a 2.4% net return.
Emerging Markets funds continued with their strong performance, posting an average 2.4% net gain for February. On a global basis, four of the strategies in the Van Hedge Fund Index were profitable last month, with mild losses characterizing the other ten. For the second straight month, Aggressive Growth was the worst performing strategy as growth stocks continued to give back some of their gains from late 2001. Most of those funds, however, easily beat the NASDAQ in February.
After the first two months of 2002, the Average U.S. Hedge Fund has slipped ?0.6% net while the Average Offshore Hedge Fund has returned 1.0% net. Those numbers compare quite favorably with the Average Equity Mutual Fund, which has lost ?4.2% year to date. U.S. and Offshore Short Selling have been the most successful strategies so far this year, although that may not be the case by the end of March. Long-biased equity-oriented strategies, such as Aggressive Growth, Value, and Opportunistic, are expected to fare well during this month?s rally.
Year to date through February, U.S. Short Selling has produced an 8.7% net return, while Offshore Short Selling and Offshore Emerging Markets follow with 6.3% and 5.5% net returns, respectively.