Equity funds form the biggest constituent of the Hedge Fund Composite Index at 66%, with fixed-income funds comprising 8%, and diversified asset-focused funds representing 18%.
The best equity performers over the past 12 months have focused on small capitalisation issues, showing a return of 5.4%. On a geographical level, the best performing hedge funds over the past 12 months have focused on investments in Japanese securities, showing a return of 5.3%.
The MSCI Hedge Fund Composite Index figures contrast with the performance of the Van Hedge Fund Index, a composite index compiled by global hedge fund advisory firm Van Hedge Fund Advisors. The latter shows a return of -1.4% for US hedge funds and –1.0% for offshore funds in the three months ending June. The MSCI Composite Index shows an increase of 2.28% over the three months ending May.
But MSCI explained that selection bias - the different composition of different indexes - could play a role in the varying performance.
MSCI also acknowledged that survivorship bias could play a factor in the long-term index performance over the last eight years. Survivorship bias describes the tendency of defunct funds dropping out of the index. This can give a positive skew to the overall performance of the index.
The week on Risk.net, November 25-December 1, 2016Receive this by email