Hedge Fund Investors Cool While Mutual Fund/Stock Investors Sweat - 07/16/02
NASHVILLE, TN, USA, July 16, 2002 ?o While mutual fund and stock investors sweat, watching their life savings erode, hedge fund investors remain relatively cool. Â¡Â§In the first six months of this year, the average hedge fund investor has done slightly better than break even while equity mutual fund investors have watched their life savings erode another 10%,Â¡Â¨ stated George Van, chairman of global hedge fund advisory firm, Van Hedge Fund Advisors International, Inc.
Â¡Â§For the first time in 25 years, the average equity mutual fund showed a loss for the trailing three-year period while the average U.S. hedge fund reported a gain of 44.1% for the same period.
Â¡Â§The superiority of hedge fund returns is even more dramatic for longer time periods. Since the inception of the Van Hedge Fund Index in January 1988, U.S. hedge funds have shown more than triple the total returns of equity mutual funds: total returns of approximately 950% for hedge funds versus approximately 280% for stock funds. In the same period, the compound annual return of hedge funds has been 17.6% versus 9.7% for mutual funds.
Â¡Â§The risk profile discrepancy is equally dramatic and similarly favors hedge funds,Â¡Â¨ Van added. Â¡Â§Since January 1988, there have been 19 quarters in which the Morningstar Average Equity Mutual Fund has lost money. In every one of those quarters, hedge funds did noticeably better. The cumulative loss in these quarters for equity mutual funds is approximately Â¡V68%. It is only approximately Â¡V5% for hedge funds.
A widely accepted risk measure is the Sharpe Ratio. It also highly favors hedge funds. For the 14 1/2 years the Van Hedge Fund Index has been produced, its annualized Sharpe Ratio is 1.4 versus 0.4 for equity mutual funds.
Â¡Â§Since our pioneering research on reward/risk characteristics of hedge funds in the early 1990Â¡Â¦s, they have continued to shine. The rapidly growing adoption of hedge funds by both individual and institutional investors is very understandable, based on these compelling statistics.Â¡Â¨
Van Hedge Fund Advisors International, Inc.
Contact: George Van, Chairman