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| | | | | | Morningstar Reports Hedge Fund Performance for May and Asset Flows for April | | View PDF with Data Tables
CHICAGO, June 20, 2012—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today reported preliminary hedge fund performance for May as well as estimated asset flows through April 2012. The Morningstar MSCI Composite Hedge Fund Index, an asset-weighted composite of nearly 1,000 hedge funds in the Morningstar Hedge Fund database, was down 0.5% in May, but still up 2.7% for the first five months of the year.
"May proved to be a challenging month for most hedge fund strategies as the European sovereign debt crisis once again dominated market sentiment," said Terry Tian, alternative investments analyst with Morningstar. "Managed futures was one of the few strategies to shelter investors from the market downturn.”
The U.S. stock market suffered the biggest decline since last September—the SandP 500 Index and the Russell 2000 Index dropped 6.0% and 6.6% in May, respectively. European and emerging markets stocks also declined sharply. The MSCI Europe NR USD and the MSCI EM NR USD indexes plummeted 12.3% and 11.2%, respectively, in May. In light of this broad market downturn, equity-based hedge funds strategies were some of the hardest hit—the Morningstar MSCI Equity Hedge Fund Index fell 3.8% in May. International-focused hedge funds also posted heavy losses. The Morningstar MSCI Europe Hedge Fund Index and the Morningstar MSCI Emerging Markets Hedge Fund Index dropped 1.8% and 5.7%, respectively.
Arbitrage strategies held up better, in part because the volume of mergers and acquisitions worldwide continued to improve despite worsening global macroeconomic conditions. The Morningstar MSCI Arbitrage Hedge Fund Index and the Morningstar MSCI Relative Value Hedge Fund Index declined only 0.2% and 0.3% in May, respectively.
Managed futures strategies finally returned to their winning ways, as major commodities, such as crude oil and copper, exhibited consistent declining trends in May. The Morningstar MSCI Systematic Trading Hedge Fund Index jumped 2.1% in May, its largest gain since July 2011, making it one of best-performing hedge fund indexes for the month.
Other winners were currency-focused hedge funds—the Morningstar MSCI Currencies Hedge Fund Index rose 2.0% in May. Currency hedge funds managed to benefit from the sharp depreciation of European and major emerging market currencies against the U.S. Dollar.
In April, single-manager hedge funds in Morningstar's Hedge Fund Database leaked $4.1 billion, while funds of hedge funds gathered $402 million. The systematic futures category experienced the heaviest redemptions among all single-manager categories, bleeding $3.8 billion. The global macro and diversified arbitrage categories received inflows of $859 million and $529 million, respectively.
May returns for the Morningstar MSCI Hedge Fund Indexes are based on funds that reported as of June 18, 2012. April asset flows are based on funds that reported as of June 14, 2012. Hedge fund investors, managers, consultants, and advisors can access additional information through Morningstar DirectSM, the company’s global research platform for institutions.
Morningstar has approximately 11,000 hedge funds and funds of hedge funds in its database. Morningstar 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. These indexes are not investible.
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 products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 375,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has more than $180 billion in assets under advisement and management as of Dec. 31, 2011. The company has operations in 27 countries.
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