The end of June saw equity markets briefly rally, which gave some hope to the remaining optimists. However standing back and taking a longer term view puts things into perspective.
Australia's equity market is well and truly stuck between a rock and a hard place, remaining almost 40% below the peak reached in November 2007 in spite of the Treasurer advising all who might listen that the local economy is the envy of the world.
That tells us two things - firstly, he might be talking his own book, and secondly that the rest of the world is in a mess. And of course Australia's economy remains firmly in the grip of those of the US, Europe and particularly China.
Absolute Return and hedge funds have certainly outperformed over the short, medium and long term - and particularly so over the past five years. Meanwhile over the past 12 months any gains have been particularly hard won.
| Fund Type | June 2012* | YTD to June | 12 months |
| All | -1.16% | +1.31% | -2.14% |
| ASX200 | +0.45% | +0.94% | -11.14% |
| % outperforming ASX | 33% | 65% | 80% |
| % with positive returns | 39% | 74% | 43% |
* Based on 31% reported June results.
The above table shows that on a relative basis hedge funds have done well, with 80% outperforming the ASX200 over the past year. However their aim, and in most cases their claim, is to provide investors with an absolute return. On this basis, only 43% succeeded.
No doubt the critics will jump on this fact to claim that hedge funds have failed to deliver, and some have. But the real message is that there are enough funds that do succeed in providing attractive risk adjusted returns to make the reward for finding the exceptional ones well worth the effort.
Regards,
Chris Gosselin
