Hedge Funds Down In July; Up 3.7% YTD

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Hedge funds finished the month of July in the red with the Eurekahedge Hedge Fund Index down 0.12% while the MSCI World Index declined 0.83%, according to new data from Eurekahedge. On a year-to-date basis, hedge funds are up 3.71%, slightly ahead of underlying markets as the MSCI World Index has returned 3.40% over the same period.

Key takeaways for hedge funds performance for the month of July 2014

  • Hedge funds were down 0.12% in July, with net asset outflows of US$3.58 billion during the month; preliminary figures revealed.
  • European funds dragged down hedge fund returns as pan-European funds shed 1.12% while Eastern Europe and Russia investing funds lost 3.28% in July.
  • Emerging markets focused hedge funds posted their sixth consecutive month of gains, up 1.00% in July and 4.08% year-to-date.
  • Asia ex-Japan fund managers outshone their global peers, gaining 2.63% in July amid a strong showing by Greater China investing hedge funds.
  • Distressed debt hedge fund strategies posted their 13th consecutive month of gains, up 0.11% in July and 4.82% year-to-date
  • Japanese hedge funds posted their third consecutive month of positive returns, up 0.51% and have outperformed the benchmark Nikkei 225 index by over 5% year-to-date.

Regional Indices

Global markets edged lower in July, mainly from rising geo-political tensions between Russia and the west and concerns over Portugal’s banking sector. Despite strong second quarter growth numbers in the US, anxiety continues to grow regarding the timing for the Fed’s abandonment of its zero-interest-rate policy following dissenting opinions on the issue in the recent FOMC meeting. Asian markets evaded this overall negative sentiment as healthy macro-economic numbers from China gave a boost to regional equity markets.

European and North American mandates contributed to losses for hedge funds in July, with Eastern Europe and Russia focused hedge funds seeing the largest decline of 3.28% as the underlying equity markets witnessed a sharp sell-off, following a new round of sanctions against Russia with the RTS Index losing 10.52% in July. Western European markets did not remain immune to this rising geo-political tension, with Germany’s DAX Index losing 4.33% during the month while the French CAC lost 4.00%. European hedge fund managers posted losses of 1.12%, with worries about Portugal’s banking sector and low levels of inflationary pressure in the Eurozone further depressing sentiment in the region. North American hedge funds dipped 0.67% as underlying equity markets saw steep declines towards the month end, and the S&P500, NASDAQ and DJIA finishing the month down 1.51%, 0.87% and 1.56% respectively.

Meanwhile, hedge funds focused on Asia delivered positive returns, with the Eurekahedge Asia ex Japan Hedge Fund Index posting the strongest returns, up 2.63% and 6.25% year-to-date. Managers focused on the region saw increases on the back of improving macroeconomic data attributed to China which appears to have backed away from the edge. Greater China focused managers were the star performers during the month returning 3.82% following an overall disappointing start to the year. Japanese fund managers posted their third consecutive month of gains, up 0.51% as the region’s long/short equity funds were supported by a rising Nikkei which finished the month up by 3.03%. Latin American hedge funds produced their sixth consecutive month of positive returns amid a strong showing in Brazilian equity, gaining 0.65% during the month and 3.50% year-to-date.

Strategy Indices

Returns across strategic mandates were mixed amid rising levels of volatility in underlying markets, with event driven, CTA/managed futures and arbitrage strategies posting losses of 0.57%, 0.36% and 0.33% respectively. Long/short equity managers were down 0.18% as gains during the earlier part of the month were eroded following a sharp sell-off in underlying markets towards end-July. Fixed income hedge funds were flat-to-marginally negative, down 0.03% with managers exposed to Russian debt markets reporting the steepest losses. Among the winning strategies for the month, multi-strategy hedge funds were up 0.44% and 3.82% year-to-date with fund managers reporting gains from their exposure to Asian equities. Macro hedge funds posted their third consecutive month of gains, up 0.14% and 0.61% year-to-date with managers reporting gains from their long USD-JPY trades. Managers utilizing relative value strategies were up 0.21% while those focused on distressed debt increased by 0.11% during the month.

Strategy Indices July
2014 YTD
Eurekahedge Arbitrage Hedge Fund Index -0.33 2.25 6.75
Eurekahedge CTA/Managed Futures Hedge Fund Index -0.36 1.69 -0.42
Eurekahedge Distressed Debt Hedge Fund Index 0.11 4.82 16.02
Eurekahedge Event Driven Hedge Fund Index -0.57 4.50 12.65
Eurekahedge Fixed Income Hedge Fund Index -0.03 4.12 7.55
Eurekahedge Long/Short Equities Hedge Fund Index -0.18 2.94 15.34
Eurekahedge Macro Hedge Fund Index 0.14 0.61 2.15
Eurekahedge Multi-Strategy Hedge Fund Index 0.44 3.82 7.06
Eurekahedge Relative Value Hedge Fund Index 0.21 3.55 5.48


Mizuho-Eurekahedge Indices July
2014 YTD
Mizuho-Eurekahedge Index – USD -1.26 1.28 6.53
Mizuho-Eurekahedge TOP 100 Index – USD -1.34 0.88 6.06
Mizuho-Eurekahedge TOP 300 Index – USD -1.30 1.22 6.38
*Based on 39.35% of funds which have reported July 2014 returns as at 12 August 2014

Eurekahedge indices are available for download from www.eurekahedge.com/indices/hedgefundindices.asp and are updated with the latest fund returns at 23:30 GMT every day. Index values and data can be downloaded for free and subscribers can download the full list of index constituents. Please contact [email protected] for more information.

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