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Barclay Hedge Fund Index slips a further 2 per cent in July

Date: Friday, August 22, 2008
Author: Hedgeweek.com

Hedge funds lost an average of 1.99 per cent in July, according to the Barclay Hedge Fund Index compiled by Fairfield, Iowa-based BarclayHedge, and are now down by 4.44 per cent since the beginning of this year. The Barclay Fund of Funds Index lost 2.57 per cent in July.

'Hedge funds had another difficult month in July,' says BarclayHedge founder and president Sol Waksman. 'Stagnation in Europe, increasing risk of recession in Japan, and ongoing mortgage problems in the US drove equity prices lower and high-yield credit spreads higher.'

Overall, 16 of Barclay's 18 hedge fund indices lost ground last month. The Equity Long Bias Index fell 2.92 per cent, Distressed Securities lost 2.79 per cent, Emerging Markets dropped 2.58 per cent, and the Technology Index was down 2.46 per cent.

'Losses were widespread throughout most hedge fund sectors,' says Waksman. 'The number of losing hedge funds outpaced winners by a three to one margin.' However, Barclay's Equity Short Bias Index rose 0.89 per cent in July, and is now up 17.38 per cent so far this year.

BarclayHedge, formerly known as the Barclay Group, was founded in 1985 and tracks more than 6,800 hedge funds, funds of hedge funds, and managed futures programmes for its 18 proprietary hedge fund indices and eight managed futures indices, used as performance benchmarks by clients including institutional investors, brokerage firms and private banks.

The Credit Suisse/Tremont Hedge Fund Index, an asset-weighted benchmark, was down 2.61 per cent in July, according to Oliver Schupp, president of Credit Suisse Index. The broad-based index was completely flat in June and is now down 2.11 per cent over the first seven months of this year.

'We estimate the Credit Suisse/Tremont Hedge Fund Index will finish down 2.61 per cent for July,' Schupp says. 'While the largest losses occurred in managed futures, down 4.20 per cent, dedicated short managers were well positioned to profit from equity market downturns and gained 2.98 per cent for the month.

'Despite July's negative performance, hedge funds historically outperform the broader equity markets in periods of downturn, and we expect that they will continue to weather the current market conditions successfully.'

The best-performing strategies in the index so far in 2008 have been dedicated short bias, which gained 15.28 per cent up to the end of July, managed futures with 10.03 per cent, and global macro with 6.34 per cent. However, fixed-income arbitrage is down 4.46 per cent, multistrategy funds 4.49 per cent, emerging markets 6.29 per cent and convertible arbitrage 7.59 per cent.

The Credit Suisse/Tremont AllHedge Index, an investible index comprising the 10 Credit Suisse/Tremont Sector Invest indices, was down 2.68 per cent net in June, while the Blue Chip Index, an investible index composed of the 60 largest funds across the 10 style-based sectors, was down 2.34 per cent.

The Credit Suisse/Tremont LEA Index, an asset-weighted composite index covering the emerging markets hedge fund universe, was down 4.20 per cent. Its Latin America sub-index was down 1.46 per cent, emerging Europe, the Middle East and Africa by 10.88 per cent and Asia by 2.62 per cent.