Morningstar Reports Hedge Fund Performance for the Second Quarter 2009, Asset Flows Through May
July 21 2009 - 10:30AM
PR Newswire (US)
CHICAGO, July 21 /PRNewswire-FirstCall/ -- Morningstar, Inc.
(NASDAQ: MORN), a leading provider of independent investment
research, today reported preliminary hedge fund performance for the
second quarter of 2009 and asset flows through May. For the
quarter, the Morningstar 1000 Hedge Fund Index posted its largest
quarterly increase, 9.25%. Previously, the index's best result
since its inception on Jan. 1, 2003, was a second-quarter 2003 rise
of 7.40%. During the second quarter of 2009, the currency-hedged
Morningstar MSCI Asset Weighted Hedge Fund Composite Index rose
5.12%, and the Morningstar MSCI Equal Weighted Hedge Fund Composite
Index rose 8.77%. The substantially stronger increase of the
equal-weighted hedge fund index indicates the lower-risk posture
adopted by many of the industry's biggest funds, which held them
back during the quarter's rally. Leading the way were hedge funds
that were most geared to the booming equity markets, the
Morningstar Emerging Markets Hedge Fund Index and the Morningstar
U.S. Small Company Equity Hedge Fund Index, rose 24.93% and 19.72%,
respectively. These gains were achieved almost exclusively in the
first two months of the quarter, as the two categories inched out
only small advances during the choppy month of June. Similarly, the
currency-hedged Morningstar MSCI Emerging Market Index increased
1.90% in June and 18.76% for the quarter. In fact, June overall was
a subdued time period, with nine of Morningstar's 18 hedge fund
indexes rising or falling less than 1% for the month. Other hedge
fund indexes that were exposed to equities also fared well. The
Morningstar Developed Asia Equity Hedge Fund Index rose 13.33%, and
the Morningstar U.S. Equity Hedge Fund Index rose 12.72%. The
laggard among net long equity indexes, the Morningstar MSCI Europe
Hedge Fund Index, still managed to rise a healthy 4.97% in the
quarter, although these results might be considered disappointing
given that the MSCI Europe Stock Index soared by 22.96% in U.S.
dollars. This discrepancy occurred largely because the MSCI Europe
Stock Index enjoyed currency gains resulting from the appreciation
of the U.S. dollar against the Euro, while the funds in the hedge
fund index were mostly denominated in local currencies. Following
on the heels of the equity hedge fund indexes were those funds
exposed to less-liquid or lower-quality debt markets. Such markets
frequently trade in tandem with equities, rising when economic
optimism abounds, and declining on economic fears. For much of the
second quarter, these debt markets were on the rebound. The
Morningstar Corporate Actions Hedge Fund Index jumped 12.55%; the
Morningstar Global Debt Hedge Fund Index rose 10.53% (aided by the
slump in the U.S. dollar); the Morningstar Convertible Arbitrage
Hedge Fund Index grew by 10.00%; the Morningstar Distressed
Securities Hedge Fund Index was up 8.68%; the Morningstar Debt
Arbitrage Hedge Fund Index appreciated by 8.52%; and finally the
Morningstar MSCI Specialist Credit Index gained 7.45%. Once again,
these indexes primarily achieved their successes during April and
May, with only the Distressed Securities Index gaining more than 3%
in June. At the bottom of the totem pole for single-strategy hedge
funds were those funds designed to have limited responsiveness to
either the stock or bond markets. The Morningstar MSCI Relative
Value Hedge Fund Index grew by 6.36% and the Morningstar Equity
Arbitrage Hedge Fund Index rose 4.07%, good results for indexes
that are designed to hedge away most systematic equity exposure.
The Morningstar Global Non Trend Hedge Fund Index grew by 3.43%.
Its counterpart, the Global Trend Hedge Fund Index, was buffeted by
a decidedly choppy climate for commodities pricing, and lost 0.53%.
Finally, the Morningstar Short Equity Index had a surprising gain
in the quarter. Given the steepness of the market's advance, its
gain of 2.00% should be a welcome surprise for short equity
investors. The quarter was not only the largest absolute gain for
the Morningstar Hedge Fund Index 1000, but it also represented that
single-strategy index's greatest quarterly victory over the
Morningstar Hedge Fund of Funds Index. At 6.22%, the Hedge Fund of
Funds Index lagged the MHFI 1000 by more than 300 basis points, as
hedge funds of funds suffered from having adopted very conservative
positions during the rocky first quarter of 2009. In contrast, the
Morningstar Multi-Strategy Hedge Fund Index just about kept pace
with the MFHI 1000, picking up 9.09%. "Smaller single-strategy
funds went full throttle back into risky assets in May and June.
Overall, hedge funds outperformed both the U.S. stock and bond
markets for the first half of the year, although they failed to
keep pace with most overseas equities markets. Larger funds were
more cautious following the difficult 2008 market, and lagged
smaller funds, as evidenced by the gap between the Morningstar MSCI
Asset Weighted and Equal Weighted Hedge Fund Composite Indexes,"
said Ben Alpert, Morningstar hedge fund analyst. June returns and
May asset flows for the Morningstar Hedge Fund Indexes are based on
funds that reported as of July 15, 2009. Returns for the
Morningstar MSCI Hedge Fund Indexes are based on funds that
reported June performance as of July 15, 2009. Hedge fund
investors, managers, consultants, and advisors can access
additional information through Morningstar Altvest(SM), the
company's research platform designed for hedge funds. Visit
http://www.altvest.com/ for more information. As announced in
September 2008, Morningstar is also now calculating hedge fund
indexes by applying the MSCI Hedge Fund Index Methodology and Hedge
Fund Classification Standard to Morningstar's hedge fund database.
These indexes demonstrate the performance of hedge funds to
investors who have hedged their currency exposure back into U.S.
dollars. The MSCI Hedge Fund Index Methodology classifies hedge
funds by investment process, geography, and asset class.
Morningstar has more than 8,000 hedge funds and funds of hedge
funds in its database. The Morningstar 1000 Hedge Fund Index, a
global, broadly representative benchmark for hedge fund
performance, has return history from January 2003. The index
comprises the top 90% of eligible assets in Morningstar's hedge
fund database. For the purposes of the index, Morningstar counts
funds with shared portfolios as a single hedge fund; funds of hedge
funds are excluded from consideration. The index is updated daily
for the previous month-end, rebalanced monthly, and reconstituted
semi-annually. In addition, Morningstar has 17 category indexes and
four broad category indexes based on Morningstar's
strategy-specific classification system for hedge funds.
Morningstar's hedge fund indexes are not investable. This press
release is not intended to be an offer or solicitation for the sale
of hedge funds. The information is not warranted to be accurate,
complete, or timely. When considering hedge funds, investors should
consider various risks, including the fact that some products
engage in leveraging and other speculative investment practices
that may increase the risk of investment loss, can be illiquid, are
not required to provide periodic pricing or valuation information
to investors, may involve complex tax structures and delays in
distributing important tax information, are not subject to the same
regulatory requirements as mutual funds, often charge high fees,
and in many cases the underlying investments are not transparent
and are known only to the investment manager. The high degree of
leverage that is often obtainable in trading can lead to large
losses as well as gains. Neither Morningstar nor its content
providers are responsible for any damages or losses arising from
any use of this information. Past performance is no guarantee of
future results. About Morningstar, Inc. Morningstar, Inc. is a
leading provider of independent investment research in North
America, Europe, Australia, and Asia. The company offers an
extensive line of Internet, software, and print-based products and
services for individuals, financial advisors, and institutions.
Morningstar provides data on more than 300,000 investment
offerings, including stocks, mutual funds, and similar vehicles,
along with real-time global market data on more than 4 million
equities, indexes, futures, options, commodities, and precious
metals, in addition to foreign exchange and Treasury markets. The
company has operations in 19 countries and minority ownership
positions in companies based in three other countries. 2009
Morningstar Inc. All rights reserved. Media Contact: Alexa
Auerbach, 312-696-6481 or YTD April - Through June 2009 June 2009
June 2009 Morningstar Hedge Fund Index Performance ---------
--------- --------- ----------------------------------------
Morningstar 1000 HF USD -0.20 9.25 8.93 Morningstar Hedge Fund of
Funds 0.15 6.22 5.46 Morningstar Hedge Fund Category Indexes
--------------------------------------- Morningstar Convtbl
Arbitrage HF USD 0.68 10.00 17.73 Morningstar Corporate Actions HF
USD -0.29 12.55 16.14 Morningstar Debt Arbitrage HF USD 1.54 8.52
9.41 Morningstar Distressed Sec HF USD 2.59 8.68 4.60 Morningstar
Dvlp Asia Equity HF USD 1.44 13.33 10.59 Morningstar EM Equity HF
USD 0.73 24.93 25.50 Morningstar Equity Arbitrage HF USD -0.08 4.07
3.32 Morningstar Europe Equity HF USD -1.23 7.70 6.12 Morningstar
Global Debt HF USD 1.70 10.53 10.95 Morningstar Global Equity HF
USD -1.67 10.69 9.75 Morningstar Global Non Trend HF PUSD -0.74
3.43 3.10 Morningstar Global Trend HF USD -2.29 -0.53 -4.33
Morningstar Multi-Strategy HF USD -0.18 9.09 10.08 Morningstar
Short Equity HF PUSD -0.86 2.00 5.72 Morningstar US Equity HF USD
0.40 12.72 14.52 Morningstar US Small Cap Eqty HF USD 1.09 19.72
16.17 Morningstar Hedge Fund Indexes with MSCI
---------------------------------------- Morningstar MSCI Composite
AW 0.20 5.12 5.64 Morningstar MSCI Composite EW 0.35 8.77 9.10
Morningstar MSCI Composite Core Funds 0.14 6.05 6.90 Morningstar
MSCI Composite Small Fund 0.49 10.39 10.42 Morningstar MSCI
Developed Markets 0.42 7.78 8.50 Morningstar MSCI Directional
Trading -1.05 3.89 2.56 Morningstar MSCI Emerging Markets 1.90
18.76 19.49 Morningstar MSCI Europe 0.09 4.97 5.20 Morningstar MSCI
Global Markets AW -1.00 2.45 2.50 Morningstar MSCI Japan 2.55 10.30
9.36 Morningstar MSCI Multi-Process Group 1.09 10.62 13.81
Morningstar MSCI North America 0.79 10.47 12.03 Morningstar MSCI
Relative Value 1.14 6.36 9.47 Morningstar MSCI Security Selection
AW 0.30 7.88 6.90 Morningstar MSCI Specialist Credit 2.33 7.45 8.15
Market Indexes -------------- MSCI World USD -0.61 19.73 4.76
S&P 500 TR 0.20 15.93 3.16 MSCI Europe USD -2.21 22.96 4.30
MSCI EM USD -1.53 33.57 34.26 BarCap US Agg Bond TR USD 0.57 1.78
1.90 S&P GSCI Energy TR 3.52 26.67 8.05 S&P GSCI Gold TR
-5.38 0.09 4.33 Est. Hedge Fund Flows By Morningstar Category ($ in
millions) May 2009 Flows YTD Flows
------------------------------------ -------------- ---------
Convertible Arbitrage $78.0 ($766.6) Corporate Actions ($783.3)
($3,287.8) Debt Arbitrage $321.7 ($2,647.6) Developed Asia Equity
($68.3) ($679.5) Distressed Securities ($336.0) ($3,967.5) Emerging
Market Equity ($178.4) ($3,528.8) Equity Arbitrage $568.9
($2,259.2) Europe Equity $640.3 ($1,233.4) Global Debt ($343.2)
($1,997.9) Global Equity ($61.7) ($5,659.5) Global Non-Trend
($887.5) ($5,025.8) Global Trend ($609.8) ($2,604.2) Multi-strategy
$381.8 ($12,622.7) Short Equity ($3.1) $39.6 U.S. Small Cap Equity
($8.8) ($385.1) U.S. Equity ($61.2) ($6,425.7) ----------- ------
--------- Total ($1,350.6) ($53,051.7) Hedge Fund of Fund Flows
------------------------ Fund of Funds - Debt $159.0 ($567.3) Fund
of Funds - Derivatives $9.2 ($161.7) Fund of Funds - Equity $158.7
($1,036.8) Fund of Funds - Event $1.4 $3.3 Fund of Funds -
Multistrategy ($34.3) ($4,216.8) Fund of Funds - Nondirectional
$0.5 $1.6 ------------------------------ ---- ---- Total $294.5
($5,977.7) Hedge Fund Flows By Morningstar Rating May 2009 Flows
------------------------------- -------------- 5-star $619.8
($6,626.7) 4-star $776.1 ($14,134.9) 3-star ($919.4) ($16,513.4)
2-star ($978.4) ($5,971.2) 1-star ($111.7) ($5,735.9) Not-Rated
($446.7) ($10,000.8) --------- ------- ---------- Total ($1,060.3)
($58,982.9) - All assets are in U.S. dollar terms - June returns
and May asset flows for the Morningstar Hedge Fund Indexes are
based on funds that reported as of July 15, 2009. Returns for the
Morningstar MSCI Hedge Fund Indexes are based on funds that
reported May performance as of July 15, 2009. DATASOURCE:
Morningstar, Inc. CONTACT: Alexa Auerbach, +1-312-696-6481, Web
Site: http://www.morningstar.com/
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