West Palm Beach (HedgeCo.net) – Hedge funds generally are more correlated in bull market runs and more de-correlation at market downturns. <\/p>\n
A comparison of the Credit Suisse\/Tremont Broad Benchmark Index (HEDG), an asset-weighted broad benchmark of the hedge fund industry, to the MSCI World Index, a broad equity index, shows that the 12-month rolling correlation between the two has dropped from its peak of 0.97 in June 2006 to 0.61 in June 2008. The findings are given in a research report by Credit Suisse Index.<\/p>\n
The report showed that during times of market stress sharp declines from HEDG’s previous peak levels of positive correlation with MSCI World demonstrated the ability to de-correlate from broad equity market indices.<\/p>\n
Between July 2007 and June 2008, HEDG increased by 4.09% compared with a fall of 12.5% in the MSCI World Index and a decrease of 13% in the S&P 500.<\/p>\n
The ability of hedge funds to maintain exposure to a range of asset classes allows them to preserve capital in down markets and, if successful, offer a more balanced investment option compared to traditional equity indices. In addition, the ability of hedge funds to monetise negative views through short selling is clearly effective during market downturns.<\/p>\n
Editing by Alex Akesson <\/p>\n
Editor for HedgeCo.Net
Email: alex@hedgeco.net<\/a><\/p>\n