July’s mediocre return for hedge funds caps best return since 2009
The Eurekahedge Hedge Fund Index (which is part of HFM) fell 0.27% in July, again lagging the equity market, but not by much. The MSCI ACWI (Local) rose 0.4% in July as the rollout of the COVID vaccine in developed markets allowed authorities to ease restrictions, supporting the global economic recovery.
Solid performance since the start of the year for hedge funds
However, the spread of the Delta variant of the virus weighed on investor sentiment, suggesting that the recent momentum in the economy may not be sustainable. The Federal Reserve stressed that the US recovery is still on track, but added that it would only consider slowing down after the economy and labor market improve significantly.
For the first seven months of the year, funds reporting to Eurekahedge are up 7.85%, marking the largest return since the start of the year in July since 2009. Over 80% of the constituents of the year index are in the green for the year.
Final asset flow figures show performance-based gains of $ 2.2 billion and net outflows of $ 9.8 billion for June. Preliminary figures for July show $ 5.7 billion in performance losses and $ 17.1 billion in inflows for the global hedge fund industry. The industry had $ 2.4 trillion in assets under management at the end of July. In the first seven months, the industry racked up $ 84.6 billion in performance-related gains and $ 63.5 billion in entries.
Hedge fund returns by strategy
Long / short equity managers posted the highest performance-related losses in July at $ 4.2 billion, although they also racked up $ 4.9 billion in inflows. Hedge funds categorized as “other” saw the largest performance increase, at $ 600 million, with net outflows of $ 1.2 billion.
Since the start of the year, long / short equity funds and multi-strategy funds have posted the strongest performance-driven growth, with $ 32.9 billion and $ 11.4 billion, respectively. Arbitrage and multi-strategy funds saw the highest investor allocations at $ 19.6 billion and $ 14 billion, respectively.
HFM said in a separate report that the average bond / credit fund is up 5% year-to-date after a stable performance in July. However, the strategy saw inflows of $ 4 billion, HFM added. The company said inflation is still a major theme driving inflows into bond and credit funds.
Billion dollar hedge funds beat small funds in July
On an asset-weighted basis, hedge funds reporting to Eurekahedge fell 0.45% in July. Since the start of the year, the Eurekahedge Asset-Weighted Index has risen only 3.57%, indicating persistent problems for the largest hedge fund managers.
However, HFM said in a separate report that larger funds were ahead of smaller funds in July. Based on data from HFM, the best performing group was event funds with at least $ 1 billion in assets under management, which gained 12.1% for the first seven months of the year.
Although HFM owns Eurekahedge, the two companies have different performance data. HFM reports that global hedge funds posted an average return of 9% in the first seven months of the year, while Billion Dollar Club funds rose 7.2%.
Although event funds with at least $ 1 billion in assets were the most upward since the start of the year, they suffered a setback in July due to a weakening outlook for merger arbitrage due to of the collapse of the Aon AON / Willis Towers Watson agreement.