CHICAGO — Hedge fund performance in the first quarter was positive, beating most of the major market indexes, with average fund performance of 2.1%, according to data from Morningstar Inc.
Managers that report their performance to Morningstar’s database looked great compared with the 2.06% return of the Morgan Stanley Capital International Europe Australasia Far East index for the quarter ended March 31. The Russell 2000 index returned 1.95%; Lehman Brothers Intermediate Government/Corporate Bond index, 1.59%; Russell 3000 index, 1.28%; and Standard & Poor’s 500, 0.64%.
Morningstar’s hedge fund database tracks about 4,100 hedge funds with assets of $1 trillion and 2,000 hedge funds of funds with $500 billion in assets, said Ryan Tagal, director, hedge funds and alternative investments.
Morningstar’s aggregate data shows that the emerging markets category was the best performer in the quarter with an average total return of 5.07%. Other Morningstar fund categories with good net average performance relative to market indexes included distressed companies; 4.13%; convertible arbitrage, 3.89%; corporate event driven, 3.52%; equity variable funds, 2.89%; fund of funds, 2.78%; merger arbitrage, 2.73%; and equity net long exposure, 2.47%.
These strategies are well-represented among the 25 best performing hedge funds (with assets of at least $100 million) for the quarter in Morningstar’s database.
Ranked overall by performance, the Monsoon India Inflection Fund was No. 1, returning 36.43% for the quarter; its sister fund, Monsoon India Inflection Fund 2, returned 34.22%. Both are managed by Monsoon Capital LLC, Bethesda, Md., and categorized as equity net long funds. In third place was Dynamic Power Hedge Fund Class F, managed by Dynamic Funds, a division of Goodman & Co. Investment Counsel Ltd., Toronto, with 29.34%, classed in the equity variable exposure category. The Emperor Greater China Fund, an emerging markets fund managed by Emperor Investment Management Ltd., Shanghai, was fourth with 25.47%, followed by the Thames River Property Investment Trust, managed by Thames River Capital LLP, London, with 24.51%.
The best performing hedge fund of funds also focused on emerging markets: the Yellow Tiger Taiwan Fund returned 19.75%.
Overall, equity net long funds dominated the first quarter performance ranking, with 11 funds among the top 25, followed by the emerging markets category, with five funds.
