The MSCI Hedge Fund Composite Index increased 0.07% for the month of October, bringing its year-to-date performance to 1.27%. As a point of comparison for the performance of hedge funds versus other investment areas, the MSCI World Equity Index increased by 7.28% in October, bringing its year-to-date performance to -21.09%. Conversely, the MSCI World Sovereign Debt Index declined by -0.39% in October, but remains up 13.75% year-to-date, while LIBOR increased by 0.15% in October, for a year-to-date increase of 1.55%.
The performance of the MSCI Hedge Fund Composite Index, an equal weighted index, may be further analyzed by reviewing the five Process Group Indices that comprise it : MSCI Directional Trading, Relative Value, Security Selection, Specialist Credit and Multi-Process Indices. These Process Group Indices are further subdivided into Investment Process and Strategy Indices, allowing for more refined peer group comparison and performance and risk analysis. Below is a brief description of the performance of select MSCI Hedge Fund Indices:
The MSCI Directional Trading Index had the greatest decline in October with a -2.16% return. However, the MSCI Directional Trading Index remained the best performing MSCI Process Group Index year-to-date with an 8.73% return.
The MSCI Relative Value Index was positive in October, up 0.19%, which brought its year-to-date performance to 4.66%. Contributing to this Index’s return was the MSCI Arbitrage Index which gained 0.88% in October 2002 for a 17% year-to-date return. Also contributing to the return was the 0.21% October return of the MSCI Merger Arbitrage Index which was up 0.51% year-to-date. Conversely, the MSCI Statistical Arbitrage Index returned -1.06% in October, but is still up year-to-date by 4.95%.
The MSCI Security Selection Index remained the worst performing MSCI Process Group Index on a year-to-date basis with a -2.98% return despite an 0.88% gain in October. Looking at this index through its geographic sub indices, there was a clear divergence between North America and Europe. On a year-to-date basis the MSCI Security Selection North American Index declined -6.90%, while the MSCI Security Selection European Index gained 5.46%.
The MSCI Specialist Credit Index increased 0.11% in October, after falling -0.91% in September. On a year-to-date basis it was up 0.53%. Contributing to the Index’s performance were the MSCI Long-Short Credit Index, which was up 2.88% year-to-date, partially offset by the MSCI Distressed Securities Index, which declined -1.62% year-to-date.
The MSCI Hedge Fund Indices and fund database contain more than 160 indices. More than 1,600 hedge funds have agreed to participate in the database and there are over 1,100 hedge funds currently in the MSCI Hedge Fund Indices and database.