Hedge fund strategies trend to negative in June

All hedge fund strategy classes experienced negative returns for the first time in the last 10 years although they continued to outperform the underlying markets.

Strategies outperform underlying markets
Hedge funds were down 1.22% in June with all strategies delivering negative returns for only the first time in the last 10 years. However, hedge funds outperformed underlying markets in the second quarter and realised marginally positive returns of 0.33% for the year to date (YTD).

Long/short equity funds experienced their second monthly loss for the year as the Eurekahedge Long/Short Equity Hedge Fund Index fell 1.25% in June. Portfolios of equity managers were dragged down by the intra-month volatility and poor returns in underlying global markets. The Long/Short Equity Index remains in positive territory YTD with gains of 0.52%. North and Latin American managers have led the way with impressive YTD returns of 2.88% and 1.67% respectively.   

Distressed debt top performer
The Eurekahedge Distressed Debt Hedge Fund Index was down 0.49% in June as the weak risk appetite led to losses in underlying assets. However, the strategy outperformed the Bank of America Merrill Lynch High Yield Index which was down 1% in June. Distressed debt is also the best-performing hedge fund strategy year to date (YTD), up 4.91%.

CTA/managed futures was the worst-performing strategy in June, losing 2.18%. Volatility picked up through the month, making trading conditions difficult for systematic trend followers as well as discretionary traders. The Eurekahedge Arbitrage Hedge Fund Index dropped 0.44% in June. The index was weighed down by a handful of North American and European managers, while Asia ex-Japan managers delivered healthy returns of 0.85%.







Negative June for relative value and global macro
Relative value funds lost 0.24% on average in June. The negative performance was driven by North American managers who witnessed a drop of 0.48% for the month. By contrast Asian managers netted a 3.13% gain.

The Eurekahedge Multi-Strategy Hedge Fund Index fell 0.58% in June. However, the index remains in positive territory for the year, up 1.31% year to date, on the back of strong returns in earlier months. Global macro funds recorded negative returns in June due to the absence of fundamentally driven trends in the currency, commodity and fixed income markets. The emerging markets growth trade stuttered in June on concerns over rising inflation in Asian countries, particularly China, while the sell-off in commodities also hurt macro portfolios.


Fixed income succumbs to downward pull
Fixed income hedge funds witnessed the first monthly loss of the year as the Eurekahedge Fixed Income Hedge Fund Index shed 0.68%. However, the strategy remains up 2.92% for the year. Fixed income assets were up in early June but sold off later in the month after European banks moved closer to accepting Greek debt ­rollover agreement.

The Eurekahedge Event Driven Hedge Fund Index had mixed returns in June as Asian managers registered positive returns while European and North American funds delivered negative performance. Asian managers were able to capitalise on rising mergers and acquisitions activity in the region and have outperformed their peers in other parts of the world by a wide margin year to date.