Defensive Funds: How Did They Fare During This Downdraft?

Many funds have rolled out alternative mutual funds and ETFs recently, and it is instructive to examine how they have performed on Tuesday's big down day.

One in particular, the Claymore Sabrient Defender Index (DEF), was designed to "Defend" against down days. The specifics of the methodology are proprietary, but in general terms, the fund is rebalanced quarterly by looking back at the last quarter and seeing what did well on the down days. So how well did it play on D day?

An awful -3.00%.

Below is a chart of other funds that track alternative strategies including fund of funds, long/short equity, market neutral, arbitrage, covered calls, convertible bonds, private equity, and currency harvest. All are publicly traded in the US as mutual funds or ETFs.

Most of the funds performed as expected, namely, they lost less $ than the equity indices. There are a couple exceptions. Hussman gets the gold star for the day as the only fund that was up (he has been notably bearish for some time). Geronimo's Absolute Return FOF mutual fund [GPHIX] lost a staggering -6.2%. They must have a levered exposure to the HFR Indices, otherwise I cannot fathom how they lost that much in a day being an Absolute Return FOF.

Comments

[j'adoube]

MebFa-

HSKSX

JP Morgan Highbridge Statistical Market Neutral Select

+0.19% on Feb. 27

And +0.87% in period Feb 27 to Mar 5, the entire period of decline.

The fund seems to do well in times of sharply rising volatility.

j'adoube