"We have two classes of forecasters: Those who don't know . . . and those who don't know they don't know." - John Kenneth Galbraith

Performance

Hedge funds as measured by the Greenwich Global Hedge Fund Index (“GGHFI”) edged higher during the month of November. With the exception of Short Sellers, all Greenwich hedge fund strategy groups are higher on the year. The GGHFI returned +1.68% while the Greenwich Composite Investable Index (“GI2”) gained +0.80% during the month, compared to global equity returns in the S&P 500 Total Return (+6.00%), MSCI World Equity (+3.87%), and FTSE 100 (+2.90%) equity indices. Year-to-date, the GGHFI and the GI2 have returned +18.35% and +4.22%, respectively, while the S&P 500 Total Return, MSCI World Equity, and FTSE 100 Indices have returned +24.05%, +24.85%, and +17.06%, correspondingly. Seventy-two percent of constituent funds in the GGHFI ended the month with gains.

Greenwich Alternative Investments Hedge Fund Index
	Total Return					3 Yr Annual		5 Yr Annual
Index	Nov 09	Oct 09	YTD	3 Month	1 Year	CAR	STD	CAR	STD
Global Hedge Fund	1.7%	-0.2%	18.4%	4.3%	19.2%	3.9%	8.1%	6.5%	6.9%
Global Long/Short	2.0%	-0.9%	21.0%	4.3%	22.1%	2.2%	10.3%	6.0%	8.9%
Global Market Neutral	0.9%	0.5%	16.6%	3.6%	16.7%	3.7%	6.2%	5.5%	5.1%
Multi-Strategy Index	1.2%	0.1%	14.2%	3.6%	17.6%	6.2%	7.4%	7.6%	6.3%
Benchmark	Nov 09	Oct 09	YTD	3 Month	1 Year	CAR	STD	CAR	STD
Lehman Agg. Bond Index	1.3%	0.5%	7.6%	2.9%	11.6%	6.4%	4.0%	5.5%	3.6%
S&P 500 Index	6.0%	-1.9%	24.1%	7.9%	25.4%	-5.8%	19.9%	0.7%	16.1%
MSCI World Index	3.9%	-1.9%	24.9%	5.8%	28.7%	-7.6%	21.6%	0.4%	17.6%

CAR= Cumulative Average Return, STD = Standard Deviation

Source: Greenwichai.com

Locally, according to Australian Fund Monitors, Australian absolute return and hedge funds outperformed the ASX200 for the second month running in November, returning 1.98 per cent for the month. This brings year-to-date performance for Australian hedge funds to 16.62 per cent.

Equity based funds returned 2.16 per cent in November, taking their YTD performance to 24.13 per cent. Non equity based funds rose by 1.71 per cent in November and 7.23 per cent YTD. Fund of funds also rose, up 0.87 per cent, while single funds gained 2.06 per cent.

The best performing strategy in November was equity long, which gained 5.36 per cent, taking its YTD performance to 41.44 per cent. Managed futures also posted a strong return, up 4.65 per cent in November.

The ASX200 was up 1.25 per cent in November and 25.61 per cent YTD, while the S&P 500 rose 5.74 per cent in November and 22.24 per cent YTD.

Markets

Sentiment (based on macro manager survey)

After eight months of mixed to bearish sentiments, a majority of macro managers were bullish on equities for December. For the month, 57% of Macro Managers reported a bullish sentiment on equities while the remaining 43% reported a bearish sentiment. This is a reversal from November, when 43% of respondents were bearish and 57% bullish on equities. At the same time, a majority of macro managers reported bearish sentiments on the US Dollar for December, another response which has been rare in 2009. Finally, fewer managers were either bullish or bearish on U.S. Treasuries for December, with 57% reporting a neutral outlook.

News

Hedge funds back in favour with investors

Nearly $US150 billion ($164bn) was invested in hedge funds in the first nine months of this year, with mid-sized funds attracting the majority of that money, according to a new report by Barclays Capital. The industry is rebounding from record losses in 2008, though they paled in comparison to those seen by stock markets. Much of last year's decline has been reversed in 2009, though redemptions as the stock market was tumbling crimped some investors...more>>

Hedge funds look to better match investors to strategies

Asian hedge funds might be in better shape than their peers elsewhere, but the crisis has reinforced the point that the industry needs to be more choosy about its sources of funding...more>>
 

Revisiting alternatives after the storm

Alternative investments received a bad rap as a result of the global financial crisis (GFC). The perception seems to be that they failed to produce the absolute returns expected by many investors, suffered liquidity problems, were highly correlated with falling equity markets and have in many cases struggled to keep up with returns generated by equity markets so far in the 2009 rally. According to a recent article by Money Management while this is to an extent true, concluding that alternatives should be abandoned completely is flawed thinking that risks leading to insufficient diversification and poor returns – especially if the dramatic rally in equity markets has already front-loaded gains for that asset class for the next few years...more>>

Light relief: Parking Your Rolls-Royce

Before going to Europe over Christmas, a man drove his Rolls Royce to a downtown NY City bank and went in to ask for an immediate loan of $5,000. The loan officer was quite taken a back, and requested collateral. "Well, then, here are the keys to my Rolls-Royce", the man said. The loan officer promptly had the car driven into the bank's underground parking for safekeeping, and gave him $5,000.

Two weeks later, the man walked through the bank's doors, and asked to settle up his loan and get his car back. The loan officer checked the records and told him, "That will be $5,000 in principal, and $15.40 in interest." The man wrote out a check, thanked the loan officer, and started to walk away.

"Wait sir," the loan officer said, "while you were gone, I found out you are a millionaire. Why in the world would you need to borrow? The man smiled. "Where else could I securely park my Rolls-Royce in Manhattan for two weeks and pay only $15.40?"