Managed Futures Funds Gain in Popularity and Performance Dec 05, 2008 URL: http://www.advancedtrading.com/showArticle.jhtml?articleID=212202126
Managed Futures is one of only two positive performing sectors within the Credit Suisse Tremont Hedge Fund Index (Broad Index) this year, returning 11.99% year to date versus a loss of 15.54% for the Broad Index. The sector has grown from a weight of 3.5% of the Broad Index in January to 4.2% at the end of October and total assets under management for the sector are now estimated at $225.5 billion, representing a 22% increase over the past year.
The managed futures sector has continued to deliver despite adverse market conditions, generating positive performance and bolstering investor confidence in the strategy. While the hedge fund industry as a whole has experienced net outflows for the year, the sector has seen positive inflows every month this year, even during months of negative performance. However, market dislocation has led to an increased dispersion in the monthly returns posted by the sector's constituent funds during the second half of the year. On average, there has been a 30% difference among the monthly returns of top and bottom performers within the managed futures sector between July and October, which is up from the 21% average difference in monthly fund performance for the sector in 2007. Risk adjusted returns through the first half of 2008 were relatively in-line across the sector, with 32 funds in positive territory and only one fund posting negative returns.
Looking at the second half of the year to date, funds are split evenly between those generating positive and negative returns, and while there are some exceptions, we found that smaller funds appear to be performing modestly better than their larger counterparts. The 16 positive performing funds currently make up approximately 43% of the sector by weight and have produced average returns of 11% in the second half of 2008. This is compared to an average return of -9% for the 16 funds in negative territory. The standard deviation on average for all funds has increased from 4.8% to 6.5% between the first and second half of the year as volatility hit record levels in the past few months with the VIX peaking at an all-time high above 80 points in October.
The managed futures sector also has had positive performance during two recent periods of market dislocation. The strategy demonstrated a +16% return during the collapse of Long Term Capital Management (August 1998. August 1999) and +28% following the technology bubble burst/September 11th crisis (March 2001. March 2003).