The Last Word: MSCI Indices Show Hedge Funds Trailed Equities In ‘06

Feb 15 2007 | 4:35pm ET

The fourth quarter was a good time to be in emerging markets and bad time to be in Japan, according to MSCI Barra’s fourth-quarter MSCI Hedge Fund Indices Global Summary. In fact, the same could be said of 2006 as a whole.

MSCI’s emerging markets and global markets indices led the way in Q4, returning 7.9% and 7.7%, respectively, bringing both strategies to 17% for the year. Japan, on the other hand, was the only MSCI hedge fund index in the red for the year, as its anemic 0.5% performance in the fourth quarter was not enough to drag it into positive territory. It finished the year down 4.7%.

The overall MSCI Hedge Fund Composite Index had a strong quarter, returning 5%, but it’s full-year return of 11.3% lagged far behind the MSCI World Equity Index, which returned 20.1%. Still, investors continued to pour money into hedge funds, as funds covered by the index added some $4.1 billion in the fourth quarter. Those who invested in smaller funds were awarded, as funds with between $15 million and $100 million in assets outperformed the MSCI Core Fund Index, 5.2% to 4.7%.

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