Select Asset Management's two diversified portfolios, the Select Defensive Portfolio and the Select Growth Portfolio, both ended 2008 deep in negative territory due mainly to poor fund of hedge fund (FoHF) performance.
The Select Defensive Portfolio was down -16.2%, and the Select Growth Portfolio down -26.8%, over the past 12 months. Given the weighting of FoHF's in each portfolio, and the gap between expected and actual returns, they were a significant drag on performance - the Gottex funds for example lost between -20.1% and -37.7% on average in the last quarter of 2008. In retrospect the manager believes the impact of redemptions and poor liquidity on FoHF's was underestimated. Other underperforming strategies in the last quarter of 2008 were property, infrastructure and long and long biased equities.
The portfolios did generate positive returns from other strategies, such as volatility and managed futures, as well as gold. Strong performance in December and early January indicates there are some positive signs for 2009, although markets will remain volatile.
