Australian hedge funds, including offshore funds sold in Australia, achieved a solid 1.13 per cent return in February 2011. DAMIEN HATFIELD writes.

Six of the 11 strategy categories monitored by Triple A Partners Australia each returned more than 1 per cent for the month. The six include fixed income (1.06 per cent); global macro/ commodities/futures (1.10); long/ short equity (1.31); market neutral equity (1.60); multi-strategy (1.76) and fund of fund multi-strategy. The five highest returns for the month came from funds managed by 36 South (18.37 per cent); Naos (13.84); Matthews Capital (8.9), Cadence Capital (8.52) and Blue Sky (7.42) There are four more months of results before we begin identifying hedge fund finalists for the annual Australian Hedge Fund Awards and related Hedge Funds Rock event, usually held in the last week of September.

We are currently in the planning stages for this year’s event but I thought that I would flag this event early, as each year I worry that we may miss managers who qualify for the various categories. We normally do a dummy run of results as to December 31. The award results are based on year to June 30 but it gives us a couple of months to identify some abnormalities. We also get a fair idea of whom the likely finalists are. Last year’s winners were: 1. Hedge Fund of the Year: Prodigal, run by Mike Munns 2. Best Long Short: also Prodigal 3. Best Market Neutral: Tasman (Regal) run by the King brothers 4. Best Emerging Manager: Pengana Asia Special Events run by Antonio Meroni 5. Best Global Macro Futures and Commodities: GMO represented by David Whitby 6. Best Fund of Funds: New Zealand Asset Management Global Fund run by Alan McChesney 7. Best Australian Investor: ING Investment Management represented by Mugunthan Siva 8. Contribution to the Industry: David Bell Let me explain the judging criteria.

We use a quant filter. The manager numbers are inputted into Pertrac and extracted to Excel. We use three criteria: 25 per cent allocated to Sortino ratio, 50 per cent to absolute returns, and 25 per cent to drawdown versus recovery. Each is weighted on 1-3 years periods. Once the finalists are identified, we request an AIMA DDQ, (Alternative Investment Managers Association Due Diligence Questionnaire) and interview each potential recipient. Pertrac runs the numbers with Mathew Jeremy from Caravel, a Brisbane-based asset consultant, doing a double-check on the output. The award committee and I do the manager interviews. Simon Ibbetson of 358 Australia chairs the committee, which includes Oliver Mauger from Perpetual. We think that the process is quite robust but if anyone has any constructive suggestions, we are all ears. Interestingly, we have had a number of knockbacks on participation. One or two managers have viewed the receipt of an award to be the kiss of death. On the other hand there are a number of managers who appear year-in, year-out as an award winner or finalist. Notable managers include Kapstream, Bennelong, Fortitude, 36 South, OC Capital, and Excalibur amongst others. In addition, we are always looking for feedback on possible Best Australian Investor and Industry Contribution. We would welcome suggestions and comments from readers of Investment Magazine.

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