Hedge Fund Performance
Performance of the Hedge Synergy NAV, Long Portfolios, Short Portfolios and S&P 500
Hedge Synergy is a virtual model hedge fund which was started on October 1, 2004. The web site was launched April 23, 2005 and is updated weekly (see Barron's classified ads 4/25/05 page MW6). The above chart shows the returns of the virtual Hedge Synergy Fund NAV, long portfolios, short portfolios and the S&P 500. For an explanation of my methodology please see Hedge Strategy.


2010 Q1 - Quarterly Hedge Fund Performance
Quarterly Performance Chart
The above chart shows the performance of the virtual Hedge Synergy Fund NAV, Long Portfolio, Short Portfolio and the S&P 500 for the first quarter of 2010. For prior quarterly Performance charts please go to the Quarterly Hedge Fund Performance web page.
The quarter started with the long portfolio 75% of equity and the short portfolio 25% of equity for a long/short portfolio ratio of 3 to 1. On January 29th (the white vertical line) the long/short portfolio ratio was changed to 2 to 1 with the long portfolio at 80% of equity and the short portfolio at 40% of equity.


 

* The portfolio market capitalization statistics are calculated at the time the current portfolios are formed.
Hedge Fund Indexes

 
The above chart compares the monthly Hedge Synergy NAV to the return of an investment in T-Bills, the S&P 500, and the Long/Short Greenwich Global, Hennessee, Barclay, Credit Suisse/Tremont Hedge Fund Indexes. The T-Bill return is based on monthly compounding using the average of the current month's daily T-Bill rate which is then divided by 12.





Long/Short Portfolio Beta

The top chart shows the betas of the long stock and short stock portfolios at the time the portfolios are formed and the bottom chart shows the performance of the S&P 500. The portfolio betas are based on the average of the betas of the individual stocks in each portfolio. I use the average of the individual stocks in the portfolios since all stocks are equally weighted when the portfolios are created.

Portfolio beta can change passively through an adaptive system based on relative momentum. Just as the card count changes in Blackjack as cards are removed from the deck, so does the portfolio beta change as stocks are removed and added to the portfolio based on the momentum of those stocks relative to the momentum of the market.

Also, as in Blackjack where varying one's hand based on the card count is no guarantee one is going to win that particular hand, having a high or low portfolio beta at any particular moment is no guarantee that one will outperform the market at that particular instance. In the long run, though, one should be able to beat the dealer or outperform the market if one follows the rules consistently.

While the long stock portfolios have currently been outperforming the S&P 500 I believe the time to switch to a long stock portfolio is long past. The time to make that move was when the long portfolio beta rose above +1.0 in May.

NOTE: It wasn't until the end of October that it occured to me to calculate and graph portfolio beta.

At this point in time, with the rally having advanced over 65%, making a switch out of the Vanguard 500 index fund would be a mistake. With such a high long stock portfolio beta any downward movement by the market would have serious negative consequences. When the market heads back down and the long stock portfolio beta falls below +1.0, I will switch out of the Vanguard 500 index fund and into the long stock portfolio. For further information please see Hedge Strategy.

Please note: the long stock portfolios that I follow in my Excel spreadsheets are not published on this web site during those periods of time when I substitute the Vanguard 500 index fund for the long portfolio (the Vanguard 500 index fund by definition has a beta of +1.0).

2010 Q1
The above table shows the returns of the individual Long and Short Portfolios for the current quarter. To review the returns of the previous quarters, please go to to the Portfolio Returns web page.



Drawdown of the Hedge Synergy Fund NAV and the S&P 500 a

 

Performance of the Hedge Synergy Fund NAV Relative to the S&P 500