CHICAGO, Oct. 20 /PRNewswire-FirstCall/ -- Morningstar, Inc.
(NASDAQ: MORN), a leading provider of independent investment
research, today reported preliminary hedge fund performance for the
third quarter of 2009 and asset flows through August 2009. Hedge
funds are recovering rapidly in 2009. The Morningstar 1000 Hedge
Fund Index climbed 7.4% during the third quarter and 17.2% through
the first nine months of the year, while the currency-hedged
Morningstar MSCI Hedge Fund Composite rose 6.1% for the quarter and
12.1% for the year through September. "Paced by an exceptionally
strong September, hedge funds began to regain their swagger in the
third quarter," said Nadia Papagiannis, Morningstar alternative
investments strategist. "The road to recovery for hedge funds was
paved by strong performance in riskier asset classes such as
emerging markets, distressed, and small-cap securities." But hedge
funds overall haven't yet returned to their October 2007 peaks--the
Morningstar 1000 Hedge Fund Index declined 25.2% through February
2009, and has only recovered 20% in the last seven months, with
11.4% to go. Certain hedge fund strategies have set new highs,
however. In September, the Morningstar Global Non-Trend Hedge Fund
Index, which includes hedge funds following global macro-economic
strategies, fully recovered from 2008 losses, despite lagging the
performance of other category indexes this year. Appreciation of
the Australian dollar and the Euro versus the U.S. Dollar as well
as spikes in silver and gold prices helped this index rise 1.9% in
September. Convertible arbitrage and emerging markets hedge funds
have outperformed all other Morningstar categories thus far in
2009. The Morningstar Convertible Arbitrage Hedge Fund Index rose
3.0% in September and 32.1% for the year through September, while
the currency-hedged Morningstar MSCI Emerging Markets Hedge Fund
Index increased 4.6% in September and 31.0% for the year through
September. Convertible bonds, which crashed in 2008 due to forced
selling by leveraged hedge funds, are enjoying a tremendous 2009.
Low prices and higher yields attracted traditional, non-hedge-fund
investors, while more companies issued convertible bonds during
tight bank lending conditions and rapidly rising equity prices.
Emerging markets hedge funds benefited from outsized rallies in
Indian, Russian, and Latin American stocks in 2009. Strong equity
markets in developed countries buoyed funds in the Morningstar
Global Equity Hedge Fund Index, which increased 3.7% in
September--slightly less than the MSCI World Equity Index, which
rose 4.0%. The Morningstar MSCI Developed Markets Hedge Fund Index
rose only 2.5%, however, as allocations to Japanese stocks dragged
down performance. The Morningstar MSCI Japan Hedge Fund Index and
the Morningstar Short Equity Hedge Fund Index were the
worst-performing Morningstar hedge fund indexes in September
dropping 1.2% and 1.6%, respectively. September saw a continuation
of the rally in small-capitalization stocks, as investors snapped
up riskier assets. The Morningstar U.S. Small Cap Equity Hedge Fund
Index rose 5.0% and the Morningstar Distressed Hedge Fund Index,
which also reflects risk appetite, jumped 6.7%. As risk-aversion
declined, hedge funds once again experienced inflows. Funds in
Morningstar's database saw $5.9 billion of new flows in August,
with the bulk of those assets going to global trend hedge funds.
With the exceptions of August and June, investors have withdrawn
assets from hedge funds every other month this year. Outflows
totaled $59.7 billion for the year through August. September
returns and August asset flows for the Morningstar Hedge Fund
Indexes are based on funds that reported as of Oct. 16, 2009.
Returns for the Morningstar MSCI Hedge Fund Indexes are based on
funds that reported August performance as of Oct. 12, 2009. Hedge
fund investors, managers, consultants, and advisors can access
additional information through Morningstar® Altvest(SM), the
company's the research platform designed specifically for hedge
funds. Visit http://www.altvest.com/ for more information.
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. 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 more than 325,000 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 20 countries and minority ownership
positions in companies based in two other countries. ©2009
Morningstar Inc. All rights reserved. Sept. Q3 2009 YTD Through
Morningstar Hedge Fund Index Performance 2009 Sept. 2009
---------------------------------------- ---- ------- ----------
Morningstar 1000 HF USD 3.10 7.43 17.22 Morningstar Hedge Fund of
Funds 2.10 5.67 11.56 Morningstar Hedge Fund Category Indexes
--------------------------------------- Morningstar Convtbl
Arbitrage HF USD 3.02 12.10 32.07 Morningstar Corporate Actions HF
USD 3.67 8.70 26.68 Morningstar Debt Arbitrage HF USD 3.32 10.14
20.01 Morningstar Distressed Sec HF USD 6.65 12.30 17.28
Morningstar Dvlp Asia Equity HF USD 1.90 7.11 18.01 Morningstar EM
Equity HF USD 6.48 13.18 41.79 Morningstar Equity Arbitrage HF USD
1.88 3.69 7.21 Morningstar Europe Equity HF USD 3.63 9.88 16.85
Morningstar Global Debt HF USD 2.52 6.80 18.59 Morningstar Global
Equity HF USD 3.71 9.23 20.19 Morningstar Global Non Trend HF PUSD
1.94 3.42 6.48 Morningstar Global Trend HF USD 1.71 3.65 -0.60
Morningstar Multi-Strategy HF USD 3.09 7.42 19.61 Morningstar Short
Equity HF PUSD -1.55 -4.04 2.18 Morningstar US Equity HF USD 3.12
8.40 23.89 Morningstar US Small Cap Eqty HF USD 4.97 12.44 30.68
Morningstar Hedge Fund Indexes with MSCI
---------------------------------------- Morningstar MSCI Composite
AW 2.40 6.09 12.12 Morningstar MSCI Composite EW 2.68 6.92 16.59
Morningstar MSCI Composite Core Funds 2.56 6.33 13.85 Morningstar
MSCI Composite Small Fund 2.74 7.25 18.21 Morningstar MSCI
Developed Markets 2.52 6.78 15.83 Morningstar MSCI Directional
Trading 1.99 4.20 6.72 Morningstar MSCI Emerging Markets 4.62 10.07
30.96 Morningstar MSCI Europe 2.37 7.37 12.74 Morningstar MSCI
Global Markets 2.48 5.84 12.07 Morningstar MSCI Japan -1.15 0.71
9.75 Morningstar MSCI Multi-Process Group 2.92 7.49 22.63
Morningstar MSCI North America 3.12 8.16 21.24 Morningstar MSCI
Relative Value 1.91 5.32 15.24 Morningstar MSCI Security Selection
3.21 8.94 22.46 Market Indexes -------------- S&P 500 TR 3.73
15.61 19.26 Russell 2000 TR USD 5.77 19.28 22.43 MSCI Europe NR USD
4.64 22.92 31.56 MSCI AC Asia NR USD 3.16 12.26 29.40 MSCI World NR
USD 3.99 17.45 24.90 MSCI Emerging Markets NR USD 9.08 20.91 64.45
BarCap US Agg Bond TR USD 1.05 3.74 5.72 Est. Hedge Fund Flows By
Morningstar Category August 2009 Flows YTD Thru August
------------------------ ----------------- ---------------
Convertible Arbitrage $184,116,808 $(451,005,530) Corporate Actions
$74,369,995 $(4,916,220,493) Debt Arbitrage $346,040,561
$(2,957,288,980) Developed Asia Equity $4,367,148 $(1,118,051,294)
Distressed Securities $382,964,845 $(4,034,529,030) Equity
Arbitrage $480,208,359 $(1,916,141,327) Global Debt $(253,090,862)
$(3,370,629,414) Global Non-Trend $222,761,334 $(4,247,330,865)
Global Trend $2,416,656,106 $(3,230,416,298) Multi-strategy
$353,691,749 $(14,505,464,687) Short Equity $(23,201,094)
$2,039,086 U.S. Small Cap Equity $(36,231,185) $(567,479,276) US
Emerging Market Equity $237,550,794 $(3,192,541,274) US Europe
Equity $630,771,859 $79,591,106 US Global Equity $325,101,469
$(8,196,678,695) US U.S. Equity $553,296,388 $(7,120,294,310)
-------------- ------------ --------------- Total $5,899,374,274
$(59,742,441,281) Hedge Fund of Fund Flows ------------------------
Fund of Funds - Debt $(299,183,938) $(453,983,423) Fund of Funds -
Derivatives $8,704,080 $(50,822,498) Fund of Funds - Equity
$(99,268,698) $(2,214,011,506) Fund of Funds - Event $211,020
$(50,089,509) Fund of Funds - Multistrategy $28,670,341
$(3,709,798,812) Fund of Funds - Nondirectional $(282,112)
$3,670,684 ------------------------------ --------- ----------
Total $(361,149,307) $(6,475,035,064) Hedge Fund Flows By
Morningstar Rating August 2009 Flows YTD Thru August
------------------------------- ----------------- ---------------
5-star $3,156,926,992 $(4,932,386,358) 4-star $1,764,077,465
$(15,465,173,249) 3-star $716,402,411 $(15,847,371,089) 2-star
$(219,373,199) $(12,994,730,823) 1-star $(400,525,049)
$(3,953,774,333) Not-Rated $520,716,347 $(13,024,040,493) ---------
------------ ----------------- Media Contact: Alexa Auerbach,
312-696-6481 or DATASOURCE: Morningstar, Inc. CONTACT: Alexa
Auerbach of Morningstar, Inc., +1-312-696-6481, Web Site:
http://www.morningstar.com/
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