U.S. hedge funds edge out S&P 500 in third quarter; Offshore hedge funds lag.

NASHVILLE, Tenn.--(BUSINESS WIRE)--Oct. 19, 1995--U.S. hedge funds as a group edged out the S&P 500 during the third quarter of 1995, while Offshore hedge funds continued to lag their U.S. counterparts, according to Van Hedge Fund Advisors Inc. (VAN), a leading hedge fund investment advisory firm.

"U.S. hedge funds, on average, pulled ahead of the S&P 500 for the first time this year during the third quarter, registering an 8.1% gain, while the S&P 500 gained 7.9%," George P. Van, chairman of Van Hedge Fund Advisors, declared. "Offshore hedge funds as a group, on the other hand, continued to post weaker returns during the third quarter, for a net average of 5.1% during the quarter."

At the top of the ladder in the U.S., the top five hedge funds among all investment styles recorded an average net return of 41.1% for the third quarter, according to VAN's research. Year-to-date through the third quarter, the top five hedge funds weighed in with a net average return of 68.1%.

Year-to-date, however, both the average U.S. and Offshore hedge fund groups underperformed the S&P 500 and the average U.S. stock mutual fund. U.S. hedge funds on average returned 19.5% and Offshore hedge funds on average returned 7.7% through the third quarter of this year, while the S&P 500 gained 29.7%, and the average U.S. stock mutual fund gained 22%.

By comparison, the average U.S. bond mutual fund returned 10.9% year-to-date, and the World Equity Index gained 13.8%.

"Despite their recently lagging the spike in S&P 500 returns, it should be noted that the net annual return of U.S. hedge funds was 15.8% on average over the past five years ended Dec. 31, 1994, while the S&P 500 returned 8.7% over the same period, the average U.S. stock mutual fund returned 8.7% and the World Stock Index returned 3.7%. The average Offshore hedge fund returned 16.5% over this period.

"There are signs, however, that we're beginning to see a return to normalcy in the U.S. stock market, with growth inequities becoming more moderate, a factor which should benefit U.S. hedge funds, which tend to perform very well in more stable markets.

"Investors also should keep in mind that hedge funds as a group tend to do well in periods of market correction. For example, U.S. hedge funds gained 3.5% cumulatively over the six down market quarters in the 1990-1994 period, while U.S. stock mutual funds lost 23.7% over the same six quarters," Van said.

Commenting on the weaker performance of Offshore hedge funds compared to U.S. hedge funds, Van said, "U.S. hedge funds invest primarily in U.S. securities and have been the beneficiaries of a major upswing in the U.S. equity market this year, while Offshore hedge funds tend to stick to European, Asian and South American markets that haven't performed nearly as well.

"If history is any indicator, they soon will catch up. Over time, it should be pointed out, the two hedge fund groups have turned in roughly comparable results."

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                       Van Hedge Fund Advisors
                          Hedge Fund Returns

                             Third Quarter 1995       Year-to-date
                               U.S.   Offshore       U.S.  Offshore
Aggressive Growth              12.4%     9.0%       30.1%     22.8%
Distressed Securities           4.4%     2.0%       14.5%     13.9%
Emerging Markets                2.5%     5.5%        2.9%      1.3%
Fund of Funds                   7.2%     8.8%       13.4%      9.2%
Income                          4.9%     2.4%       10.9%      5.2%
Macro                          12.5%     7.2%       -0.3%      2.2%
Market Neutral-Arbitrage        2.4%     N/A        12.4%      N/A
Market Neutral-
 Securities Hedging             6.7%     N/A        15.8%      N/A
Market Neutral Strategies       N/A      1.2%        N/A       6.7%
Market Timing                   2.1%     0.5%        7.4%      6.0%
Opportunistic                   9.5%     7.4%       22.0%     15.6%
Special Situations              6.8%     7.2%       18.8%     18.0%
Short Selling                  -4.8%   -11.2%      -15.9%    -16.2%
Several Strategies              5.6%     N/A        18.5%      N/A
Value                          11.0%     6.7%       28.0%     13.1%-0-

Van Hedge Fund Advisors, Inc. maintains what is believed to be the largest database of hedge funds in the world, monitoring the performance of approximately 1,400 hedge funds (850 in the U.S., 550 Offshore) that actively manage over $80 billion in assets. VAN works with faculty of the Owen Graduate School of Management of Vanderbilt University in its hedge fund research.

A registered investment advisor, Nashville, Tenn.-based Van Hedge Fund Advisors identifies top-performing hedge funds for substantial investors both in the U.S. and overseas.

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Note to editors: Van Hedge Fund Advisors also has available on request a Global Index that combines the performance of U.S. and Offshore hedge funds in aggregate and by investment style, over the past five years, compared to other investment benchmarks (i.e. S&P 500, MSCI World). Similar five-year information is available for U.S. and Offshore returns.

Information on U.S., offshore and global hedge fund performance is based on information received from hedge funds (and not audited or independently verified) from the hedge funds in Van Hedge Fund Advisors' databases and may not be representative of all hedge funds. Different statistics may be based on different numbers of funds. Averages are not dollar-weighted. Past results are not necessarily indicative of future performance.

CONTACT: Van Hedge Fund Advisors, Nashville

George P. Van, 615/377-2949