Dr Drachman (pictured) says: 'With the S&P 500 down approximately eight per cent in January, hedge funds are still in a difficult market environment. Regardless, the Air Losho Index was up 0.18 per cent for the month, while early estimates for the Credit Suisse/Tremont Long/Short Equity Hedge Fund Index also point towards a modest positive return, indicating that managers as a group have significantly reduced their exposure to the markets.

'Given the heightened focus on liquidity, we have seen an increased interest in liquid alternative strategies. With strong tracking relative to its benchmark, we believe that the Air Losho Index will be a critical tool in the coming months as the market crisis continues to unfold.'
 
For 2008, the Air Losho Index was down 16.59 per cent, while its benchmark was down 19.76 per cent. Conversely, the Inverse Air Losho Index returned a positive 16.70 per cent for 2008.

The annualized volatility of the Air Losho Index was 13.59 per cent for 2008, which Dr Drachman says compared well to the 12.09 per cent volatility of the Credit Suisse/Tremont Long/Short Equity Hedge Fund Index.
 
The Air Losho Index reflects the return of a basket of liquid, investable market factors selected and weighted in accordance with an algorithm that aims to approximate the aggregate returns of the universe of long/short equity hedge fund managers.
 
The Inverse Air Losho Index reflects the return of a basket of liquid, investable market factors selected and weighted in accordance with an algorithm that aims to approximate the aggregate returns of short exposure to the universe of long/short equity hedge fund managers.