Hedge fund bears thrive

The gloomy economic environment is bolstering the returns of hedge funds that focus on short selling and distressed securities, according to figures released yesterday by Van Hedge Fund Advisors International.

Short sellers were the strongest performers in July, averaging a return of 5% for the month, according to the Nashville-based investment adviser and hedge fund information provider. Their success is not surprising, given the continuing downdraft in equity values: the S&P 500 index fell 1%, the Russell 2000 fell 5.3% and the Nasdaq index fell 6.2% in the same period.

Van said that offshore (non-US) short selling was the second most successful hedge fund strategy in July, reaping net returns of 3.3% for the month. By comparison, Morningstar’s World Equity Index fell 12.4% in the same period.

Van’s index of all US hedge fund styles fell 60 basis points in July, outperforming all the major US equity indexes except the Dow, which rose 30 basis points.

Van said that hedge funds specialising in US distressed securities investing have had the best net return so far this year, up 14.1% to end-July. The second most successful hedge funds are the offshore distressed securities investors, which were up 11.3% in the first seven months of this year.

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