| Hedge Fund Observer : Negative returns in July |
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| 03/09/2006 | |
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July did not yield any good news for hedge fund investors. The Hennessee Hedge Fund Index lost 0.11% while the S&P 500 progressed 0.62%, and the Lehman Brothers Intermediate Government Corporate Bond Index added 1.12%. Nevertheless, year-to-date, the Hennessee Hedge Fund Index remains positive with a 5.28% performance against 3.35% for the S&P 500. "Hedge funds underperformed the broad equity markets for the second month in a row," said E. Lee Hennessee, managing principal of Hennessee Group. "Hedge fund portfolios that did not have asset allocations to distressed (+8.35% YTD), merger arbitrage (+8.31% YTD), or convertible arbitrage (+7.33% YTD), likely underperformed the Hennessee Hedge Fund Index for July and the year." Business school EDHEC reported slightly better performance for most hedge fund strategies, which did not achieve to climb above their average historical performance. It said that the CTA Global is the only strategy posting significantly negative returns, with -2.29% for the month of July. The highest positive return came from Short Sellers with 1.26%. "It should be noted that this strategy was also the only one, apart from Fixed Income Arbitrage, to have returns that were higher than their historical average during the month of July," added the EDHEC. The Credit Suisse/Tremont Hedge Fund Index reports slightly different returns than Hennessee's. With a 0.29% increase in July, Oliver Schupp, President of the Credit Suisse/Tremont Hedge Fund Index, said that "the intensifying Middle East conflict, demand in China and concerns about the upcoming hurricane season in the U.S., contributed to a volatile market." Some strategies did benefit from this volatiliy, such as the dedicated short bias, which ended July up 2.9%. Other well-performing strategies included emerging markets. Olivier Schupp said: "Despite increasing performance volatility, markets rallied at the end of July as a sharp slowdown in gross domestic product growth gave investors cautious optimism that the Federal Reserve might stop lifting interest rates after two years of consecutive increases. As a result, Emerging Market managers experienced an end to the negative performance of the past couple months and posted positive returns of 1.99% as emerging market economies continued to show solid growth." J.L. |
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