CHICAGO, July 27 /PRNewswire-FirstCall/ -- Morningstar,
Inc. (Nasdaq: MORN), a leading provider of independent investment
research, today reported preliminary hedge fund performance for
June 2010 and asset flows through
May. In June, the Morningstar 1000 Hedge Fund Index fell 0.3%,
ending the quarter with a 3.6% loss, and down 2.2% for the year to
date. The currency-hedged Morningstar MSCI Composite Index also
dipped slightly in June, 0.2%, finishing the quarter down 1.5%.
Losses in May dragged quarterly results down for almost every
hedge fund strategy, particularly the equity strategies. Global
equities tanked in the wake of Europe's debt crisis, uncertainty regarding
financial regulation, and disappointing economic indicators in
the United States. Hedge funds
held up better than the unhedged markets, but nonetheless suffered
losses. The Morningstar Europe Equity Hedge Fund Index lost 8.3%
against the MSCI Europe NR stock index's 15.2% quarterly plunge,
while the Morningstar US Equity Hedge Fund Index fell only 4.7%
over the quarter against the S&P 500's 11.4% decline.
"The markets took hedge funds downhill in the second quarter,
but in the end, many arrived with their hats still on," said
Nadia Papagiannis, alternative
investments strategist for Morningstar. "Whereas absolute returns
are not always possible for hedge funds, hedged strategies do tend
to protect investors' wealth during selloffs."
The credit markets also experienced major turbulence. Besides
sovereign debt problems in European countries such as Greece and Spain, the U.S. municipal market deteriorated,
as states such as Illinois and
California face large deficits and
financing difficulties. Debt-oriented hedge funds found safety in
U.S. Treasuries and sovereign credit default swaps. The Morningstar
MSCI Specialist Credit and the Morningstar Debt Arbitrage Hedge
Fund indexes concluded the quarter with minor losses of 0.3% and
0.1%, respectively.
Volatility and quick reversals in trading patterns in May and
June did not bode well for funds in the Morningstar Global Trend
Hedge Fund Index that aim to profit from longer-term price trends
in derivatives. The index fell 4.0% in May and recovered 0.4% in
June. Sustained upward price trends in U.S. and Japanese government
bonds contributed to profits in June.
Merger arbitrage also experienced some modest gains in June,
although overall U.S. merger and acquisition deal volume for the
year to date fell to its lowest point since 2003, according to
Mergermarket. Tightening spreads contributed to profits in June,
though, and pockets of optimism were seen in smaller-capitalization
deals and in countries such as India. The Morningstar MSCI Merger Arbitrage
Hedge Fund index gained 0.5% in June and 0.1% for the quarter.
Corporate event-driven strategies such as merger arbitrage saw
inflows in May. Overall, funds in Morningstar's database pulled in
$1.2 billion for the month, although
these funds have experienced net outflows of $2.1 billion in the first five months of the
year. Multi-strategy funds in the database suffered significant
withdrawals year to date of $2.7
billion.
June returns for the Morningstar Hedge Fund Indexes and the
Morningstar MSCI Hedge Fund Indexes are based on funds that
reported as of July 26, 2010. May
asset flows are based on funds that reported as of July 19, 2010. Hedge fund investors, managers,
consultants, and advisors can access additional information through
the Morningstar® Alternative Investment Center(SM), formerly
Morningstar® Altvest(SM), the company's research platform designed
specifically for hedge funds, or Morningstar Direct(SM), the
company's global research platform for institutions.
Morningstar has approximately 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.
In addition to calculating the Morningstar Hedge Fund Indexes,
Morningstar also calculates 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.
This 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 approximately 360,000 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 21 countries.
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|
Morningstar Hedge Fund Index
Performance
|
June 2010
|
|
YTD Through June
|
|
Morningstar 1000 HF
USD
|
-0.31
|
|
-2.24
|
|
Morningstar Hedge Fund of
Funds
|
-0.37
|
|
-5.08
|
|
|
|
|
|
|
Morningstar Hedge Fund Category
Indexes
|
|
|
|
|
Morningstar Convtbl Arbitrage HF
USD
|
0.17
|
|
-1.73
|
|
Morningstar Corporate Actions HF
USD
|
-0.28
|
|
4.00
|
|
Morningstar Debt Arbitrage HF
USD
|
0.81
|
|
2.02
|
|
Morningstar Distressed Sec HF
USD
|
2.00
|
|
12.13
|
|
Morningstar Dvlp Asia Equity HF
USD
|
0.91
|
|
-2.25
|
|
Morningstar EM Equity HF
USD
|
-0.71
|
|
-4.11
|
|
Morningstar Equity Arbitrage HF
USD
|
-0.41
|
|
-4.37
|
|
Morningstar Europe Equity HF
USD
|
-0.12
|
|
-9.11
|
|
Morningstar Global Debt HF
USD
|
0.73
|
|
1.89
|
|
Morningstar Global Equity HF
USD
|
-1.01
|
|
-4.77
|
|
Morningstar Global Non Trend HF
PUSD
|
-0.34
|
|
-1.73
|
|
Morningstar Global Trend HF
USD
|
0.41
|
|
-2.91
|
|
Morningstar Multi-Strategy HF
USD
|
-1.06
|
|
-2.74
|
|
Morningstar Short Equity HF
PUSD
|
1.74
|
|
-4.12
|
|
Morningstar US Equity HF
USD
|
-1.34
|
|
-0.70
|
|
Morningstar US Small Cap Eqty HF
USD
|
-3.68
|
|
-3.67
|
|
|
|
|
|
|
Morningstar Hedge Fund Indexes
with MSCI
|
|
|
|
|
Morningstar MSCI Composite
AW
|
-0.22
|
|
0.90
|
|
Morningstar MSCI Composite
EW
|
-0.84
|
|
-0.25
|
|
Morningstar MSCI Composite Core
Funds
|
-0.43
|
|
0.09
|
|
Morningstar MSCI Composite Small
Fund
|
-1.05
|
|
-0.58
|
|
Morningstar MSCI Developed
Markets
|
-1.26
|
|
0.00
|
|
Morningstar MSCI Directional
Trading
|
-0.63
|
|
-1.01
|
|
Morningstar MSCI Emerging
Markets
|
-0.21
|
|
-0.29
|
|
Morningstar MSCI
Europe
|
-0.34
|
|
0.44
|
|
Morningstar MSCI Global
Markets
|
-0.23
|
|
-0.27
|
|
Morningstar MSCI
Japan
|
-3.44
|
|
-1.44
|
|
Morningstar MSCI Multi-Process
Group
|
-0.93
|
|
0.37
|
|
Morningstar MSCI North
America
|
-1.53
|
|
0.41
|
|
Morningstar MSCI Relative
Value
|
-0.12
|
|
1.72
|
|
Morningstar MSCI Security
Selection
|
-1.28
|
|
-1.26
|
|
Morningstar MSCI Specialist
Credit
|
-0.07
|
|
4.65
|
|
|
|
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Market Indexes
|
|
|
|
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BarCap Gbl Agg 500M TR
USD
|
1.53
|
|
-0.31
|
|
DJ UBS Commodity TR
USD
|
0.32
|
|
-9.60
|
|
MSCI AC Asia NR USD
|
-0.15
|
|
-3.20
|
|
MSCI EM NR USD
|
-0.73
|
|
-6.17
|
|
MSCI Europe NR USD
|
-0.74
|
|
-16.72
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|
Russell 2000 TR USD
|
-7.75
|
|
-1.95
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|
S&P 500 TR
|
-5.23
|
|
-6.65
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Est. Hedge Fund Flows By
Morningstar Category
|
May 2010 Flows
|
YTD Through May
|
|
Convertible Arbitrage
|
$
65,262,582
|
$
107,463,039
|
|
Corporate Actions
|
$
567,629,723
|
$
1,981,787,564
|
|
Debt Arbitrage
|
$
63,032,984
|
$
(771,867,542)
|
|
Developed Asia Equity
|
$
(28,288,502)
|
$
(382,024,931)
|
|
Distressed Securities
|
$
59,629,297
|
$
(1,223,775,213)
|
|
Emerging Market
Equity
|
$
46,335,984
|
$
33,726,112
|
|
Equity Arbitrage
|
$
(85,330,544)
|
$
(395,805,454)
|
|
Europe Equity
|
$
(645,147,931)
|
$
159,307,540
|
|
Global Debt
|
$
(5,748,361)
|
$
(282,995,640)
|
|
Global Equity
|
$
(28,425,034)
|
$
(1,188,544,044)
|
|
Global Non-Trend
|
$
446,943,249
|
$
2,717,555,848
|
|
Global Trend
|
$
183,648,548
|
$
(646,232,791)
|
|
Multi-strategy
|
$
390,198,056
|
$
(2,703,199,224)
|
|
Short Equity
|
$
(862,761)
|
$
(9,651,512)
|
|
U.S. Equity
|
$
136,930,957
|
$
548,473,871
|
|
U.S. Small Cap Equity
|
$
(4,395,523)
|
$
(23,910,368)
|
|
TOTAL SINGLE-STRATEGY HEDGE FUND
FLOWS
|
$
1,161,412,724
|
$
(2,079,692,745)
|
|
|
|
|
|
|
Est. Flows by Morningstar
Rating
|
|
|
|
1-star
|
$
10,579,038
|
$
(498,471,762)
|
|
2-star
|
$
(7,889,626)
|
$
(713,103,082)
|
|
3-star
|
$
(116,480,637)
|
$
(3,064,757,627)
|
|
4-star
|
$
595,636,789
|
$
3,029,263,516
|
|
5-star
|
$
385,086,780
|
$
962,800,296
|
|
No Rating
|
$
294,480,380
|
$
(1,795,424,086)
|
|
TOTAL SINGLE-STRATEGY HEDGE FUND
FLOWS
|
$
1,161,412,724
|
$
(2,079,692,745)
|
|
|
|
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Media Contact:
Nadine Youssef, 312-696-6601 or
nadine.youssef@morningstar.com
©2010 Morningstar Inc. All rights reserved.
MORN-R
SOURCE Morningstar, Inc.