Opalesque Solutions

New Opalesque Emanagers Index: Emerging hedge fund and CTA managers down 3.62% YTD, returned 53% since 2009

November 8, 2011

Opalesque Ltd., a leading provider of online information services to the alternative investment industry, today announced the official launch of the Opalesque Solutions Emanagers Database and Index series. The Opalesque Emanagers Total Index is based on currently 293 emerging hedge fund and managed futures fund managers listed in the Emanagers database, the industry's only database dedicated exclusively to hedge fund management firms less than 48 months old and with assets under management of less than $600 million at the time of the firm's inception.

The Emanagers Total Index, currently consisting of 198 hedge funds and 94 managed futures funds, lost 1.91% in September and is down 3.62% year to date. Since January 2009, the index has performed exceptionally well, returning 34.5% in 2009 and 18.73% in 2010, adding to a cumulative return of 53.89%. Funds listed in the Emanagers Database thus managed to outperform both the HFRI Fund Weighted Composite Index and the MSCI World Index every year so far since 2009.

To provide a more detailed picture and allow for reasonable comparison, Opalesque also created two sub-indices, namely the Emanagers Hedge Fund Index and the Emanagers CTA Index. Our data shows that although managed futures strategies and hedge fund strategies tend to perform almost independently in normal market conditions, the correlation changes to a strong negative in times of market turmoil, like the ones experienced in late 2008 to early 2009, as well as the summer months of 2011. This provides strong evidence that a mix of hedge fund and managed futures strategies is a very useful portfolio diversifier in the long run.

Performance analysis of our sub-indices slightly changes the picture in the short run: Emerging hedge fund managers underperformed the HFRI year to date, with a cumulative loss of -5.32% compared to -4.85%. Interestingly, this underperformance arose in the months of July to September this year. We assume the reason for the bigger drawdown this summer is the overall higher performance volatility of Emanagers hedge funds (8.47) compared to HFRI funds (6.46).

In the long run, however, Emanagers hedge funds outperformed the HFRI in 14 of the 21 months tracked Opalesque so far, returning 17% in 2010 and 37.6% in 2009, adding to a cumulative return of 52.5%, compared to 25.9% for the HFRI. This supports previous empirical research (e.g. Neuberger Berman (2011) and Infiniti (2009)) showing that emerging hedge fund managers tend to outperform their established peers.

Emanagers managed futures funds had a better year than hedge funds and are still up 0.17% year to date.

Performance (in %), Volatility and Equity Market Beta (in %)
Index Sep 2011 YTD 2010 2009 Total since Jan 2009 Volatility Equity market beta
Emanagers Total Index -1.91 -3.63 18.73 34.51 53.89 6.81 39
Emanagers Hedge Fund Index -3.58 -5.32 17.07 37.59 52.51 8.47 49
Emanagers CTA Index 1.07 0.17 19.15 20.52 43.84 6.33 25

HFRI Fund Weighted Composite -3.43 -4.85 10.24 20.01 25.89 6.46 38
MSCI World -8.45 -13.75 9.40 27.07 19.90 16.39 1

- Florian Guldner