Hedge funds post July gains; some score big

Date: Monday, August 9, 2010
Author: Svea Herbst-Bayliss, Reuters

Average hedge fund up 1.9 pct in July - Hennessee

* Citadel, SAC among strong performers (Adds details from Hedge Fund Research)

Hedge funds posted small gains in July but lagged the broader market because many managers played it safe after market tumult in May and June took a bite out of their portfolios, according to data released on Friday,

Reversing two months of losses, the average hedge fund gained 1.9 percent in July, after dipping 1.35 percent in June and falling 3.01 percent in May, consultants at Hennessee Group found.

The broader Standard & Poor's 500 index .SPX climbed 6.88 percent last month.

Hedge Fund Research (HFR), another firm that tracks flows and returns, said hedge funds gained 1.82 percent in July.

July's performance left hedge funds with a gain for the year of 1.87 percent according to Hennessee, and a gain of 1.52 percent according to HFR, while the broader market was down 1.21 percent.

Funds that pick stocks posted some of the best returns, with the HFRI Equity Hedge Index gaining 2.88 percent which helped fuel the monthly gains. Funds specializing in event-driven strategies posted a gain of 2.19 percent as liquidity and risk tolerance continued to improve and equity and fixed income issuance proceeded throughout the month, HFR said.

As expected, hedge funds that exclusively bet on stock market declines fared the worst last month with so-called short-sellers dropping 6.30 percent.

Some of the best-known and most closely watched hedge fund firms turned in strong performances in July, after a few tough weeks when fears about the U.S. economy and Europe's expanding debt crisis sent markets tumbling.

Kenneth Griffin's flagship funds at Citadel rose roughly 4 percent last month, an investor familiar with the fund said. The funds were up 1 percent for the year through July after being down 3 percent through June. They stormed back to huge gains in 2009 following heavy losses in 2008 when the industry posted its worst-ever performance.

Steven Cohen's SAC Capital Advisors, one of the world's biggest hedge funds with $12 billion in assets, reported a 3.7 percent gain in July, according to an investor.

Peter Thiel's Clarium Capital Management, which makes big bets on broad economic themes, posted a 5 percent gain in July after months of seeing assets shrivel amid poor returns, an investor said.

Stephen Mandel, known as one of the original Tiger Cubs who spun out of Julian Robertson's successful firm, posted a 5.5 percent gain in July at Lone Pine Capital, leaving him up 2 percent for the year, an investor said.

Harbinger Capital Partner's Credit Distressed Blue Line Fund, which specializes in distressed securities and started with a bang when it gained 9.45 percent in its first month of trading in April 2009, was up only 0.5 percent in July, according to an investor.

Harbinger founder Philip Falcone's flagship Harbinger Capital Partners Offshore fund was off 10.7 percent through the first two weeks of July, industry data show. That left the fund to rank as one of the industry's worst performers for the year, according to HSBC Private Bank.

Because hedge funds are not required to release their returns or asset size to the public, any numbers that come out are analyzed carefully for clues on how the $1.6 trillion industry is performing.