Credit Suisse Index Co. research released Thursday found hedge funds are generally able to weather turmoil better than other market participants.
The study from the Credit Suisse/Tremont Hedge Fund Index, which examined the effects of five crises on hedge funds and world financial markets, found that hedge funds, if affected, were able to return to positive returns faster than global equity or debt markets.
In mid-to-late 1997, for example, hedge funds exhibited de-correlation following the peak of the Asian Crisis, and the hedge fund index returned 23.62% from July 1997 through June 1998.
During the Russian Debt/Long Term Capital Management crisis, while many strategies suffered, equity market neutral and long/short equity quickly rebounded, showing that the diversification of hedge fund strategies provided some protection, the study said.
During the dot-com bubble burst in mid-2000, hedge funds generally maintained flat returns, as well as a strong de-correlation as hedge funds quickly adapted to the crisis, the study found.
After the 9/11 terrorist attacks, hedge funds maintained steady returns and hedged against the crisis, according to the research. Finally, amid the credit crisis of early 2005, hedge funds again delivered positive performance in the face of declining government bonds, the study said.
