Summer holiday season has proved to be one of the toughest times of the year for hedge funds. All major indices that follow hedge funds performance took a major beating in June. According to Bloomberg, hedge funds lost 1.4 percent, HFRX Global Hedge Fund Index dropped 1.3 percent whereas Lyxor Hedge Fund Index was down 1.6 percent in June.
Hedge Funds – Event & Long/Short Equity Down in June
Over the past few weeks markets have been panicky as better than expected jobs data came to surface, fueling speculation that the Federal Reserve will curb QE sooner rather than later. However the decline in the bond market has equaled losses in equities as well. In these less than ideal times, currency and credit hedge funds took the largest losses whereas event driven and long/short equity funds fared only slightly better. Event driven and L/S equity strategies have been the star performers of 2012 and this year as well. HFRX Event Driven Index was down 1.14 percent, up 7.7 percent YTD, whereas HFRX Equity Hedge Index was down 1.89 percent over the same period, up 4.6 percent YTD.
Hedge Funds – Loeb, Dinan, Cooperman Lose in June
All high flying managers including James Dinan, Dan Loeb and Leon Cooperman took in their first losses last month. Loeb‘s Third Point recorded a decline of -1.8 percent in June, and his event driven strategy did not do well when both equity and bond markets declined at the same time. Third Point Offshore Fund is still up 12.6 percent YTD.
The other net gainer of the year has been James Dinan‘s York Capital, whose flagship York Select Fund has netted +17 percent YTD. The $15.5 billion fund recorded a slide of 1.7 percent last month, receiving the first dent in returns for the year . York uses a multi-strategy approach that hinges on event driven market developments. Leon Cooperman‘s Omega Advisors, a long/short equity strategy, declined 1 percent in June, but is still up 10.5 percent YTD. David Einhorn’s Greenlight Capital, another long/short equity hedge fund, was down 1.1 percent, bringing the YTD returns to +7.4 percent. Einhorn’s returns were not helped by the plummeting prices of gold, and Greenlight‘s gold fund is reported to be down 11.8 percent in June.
Barry Rosenstein’s event driven hedge fund, Jana Partners incurred a loss of 1.3 percent in June, bringing YTD performance to +10 percent. According to Bloomberg, the Jana Nirvana Fund suffered a loss of 1.7 percent, still rising 16 percent YTD.
Best Performing Hedge Funds Strategies
The best performing hedge fund strategies have crumbled in the past two months, shaken by the simultaneous sell-off in both equity and bond markets. Hedge fund managers have lamented for quite some time that it is hard to ensure good performance when markets refuse to follow fundamentals and move on artificial news. This seems to have been the root cause of this year’s losses, where good market news was interpreted as a cue for selling by short term investors whereas bad data gave confidence that QE would stay in and the stream of cash from Fed won’t stop.