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Thursday, May 20, 2010

Beware Mutual Funds Bearing Hedging

News summary by MFWire's editors

A piece in the June 7 edition of Forbes Magazine (available online today) takes aim at mutual funds that try to earn positive returns regardless of stock market performance.

The article, titled The Problem with Absolute Return Funds, goes after mutual funds that use a hedging strategy, such as absolute return, market neutral and equity long-short funds, which Forbes calls "the fad of the moment."

In particular, Forbes attacks the $95 million AUM Old Mutual Analytic for its high fees and negative returns, and the Vanguard Market Neutral Fund.

In April, there were 106 hedge-fund mimicking funds, with $37 billion under management. Over the past five years they have returned 2.6 percent annually on average, according to Lipper, compared to a 2.8 percent annual return for the S&P 500 and 5.4 percent for the Barclays U.S. Aggregate Bond Index, Forbes noted. 

Edited by: Daniel Tovrov

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