Hedge Funds Rally in July on Stock Gains, Eurekahedge Says

Date: Thursday, August 13, 2009
Author: Tomoko Yamazaki, Bloomberg.com

Hedge funds extended their rally in July as equities managers benefited from global stock market gains, according to Eurekahedge Pte.

The Eurekahedge Hedge Fund Index, tracking more than 2,000 funds, added 2.1 percent and gained for a fifth straight month, taking its year-to-date advance to 12 percent, according to a preliminary report by the Singapore-based research firm, based on 42 percent of funds that reported July performances. The industry had a net inflow of $1 billion, the third consecutive month it lured fresh money, and $7 billion in trading gains.

Hedge fund managers are making a comeback after suffering their worst year on record in 2008, as stock markets recovered amid optimism that the worst of the global economic recession has passed. The MSCI World Index jumped 8.4 percent in July, bringing its year-to-date advance to 14 percent.

“The month’s returns were achieved on the back of strong rallies across underlying equity markets despite a rough start to the month,” Eurekahedge wrote in the report.

The worst U.S. economic slump since the Great Depression abated in the second quarter as government spending programs started to kick in. Gross domestic product shrank at a better-than-forecast 1 percent annual pace after a 6.4 percent drop the prior three months, Commerce Department figures showed on July 31 in Washington.

All of Eurekahedge’s seven regional indexes rose last month, with managers of Asian and emerging markets funds the best performers, the report showed.

North America

The Eurekahedge North American Hedge Fund Index gained 2.1 percent as the Standard & Poor’s 500 Index added 7.4 percent. The Eurekahedge Asian Hedge Fund Index climbed 4.2 percent, while the measures tracking Japan and Latin America rose 0.3 percent and 3.2 percent respectively.

Eight out of nine Eurekahedge measures tracking different hedge-fund strategies rose. Managers using so-called event-driven strategies, which involve investing in companies such as those going through mergers and acquisitions, posted the best performance. Long/short equities funds added 3.1 percent.

Eurekahedge’s global index last year slid the most since the Singapore-based firm began tracking data in 2000. In June, hedge-fund assets rose for the second consecutive month, the first back-to-back increase in a year, bringing total assets under management to $1.33 trillion, Eurekahedge said last month.

Hedge funds are mostly private pools of capital whose managers participate substantially in the profits from their speculation on whether asset prices will rise or fall.

Eurekahedge plans to release a full report later this month.

To contact the reporters on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net