HFRI Fund Weighted Composite Index up 0.76% in July

Date: Tuesday, August 9, 2011
Author: Wendy Chothia, HedgeWeek

Equity markets extended declines in July as investors exhibited concern with regard to both the extension of the US debt limit and continuing concerns about European sovereign debt risk. US fixed income yields fell and gold posted record gains, while the US dollar traded in a wide range over the month. The HFRI Fund Weighted Composite Index posted a gain of 0.76% for July driven by a strong contribution from Macro trend-following strategies which gained 3.57% for the month.

Reversing the declines of the prior 2 months, the HFRI Macro (Total) Index rose +2.52% for July with gains across most Macro and CTA strategies. The HFRI Macro Systematic Diversified Index gained +3.57% led by trend following gains in fixed income and commodities, including precious metals, oil and agriculturals. Discretionary and multi-strategy managers benefited from commodity gains complemented by advances in fixed income and short US Dollar positioning.

The HFRI Event Driven (Total) Index posted a decline of 0.07% for July. Equity special situations, distressed and merger arbitrage strategies experienced declines as a result of both equity and credit exposure, with the HFRI ED: Distressed Index declining by -0.05%. Low net exposure sub-strategies, including ED: multi-strategy and credit arbitrage had partially offsetting positive contribution to index performance. In the M&A space, general spread widening and losses in the media sector contributed to declines, with the HFRI ED: Merger Arbitrage Index declining 0.24% for the month.

The HFRI Equity Hedge (Total) Index declined by 0.09% in July, with gains in equity market neutral, short bias and energy/basic materials strategies narrowly offset by declines in fundamental value and technology/healthcare. The HFRI Equity Market Neutral Index posted a gain of 0.16% with continued positive contributions from quantitative factor based strategies. Fundamental Growth strategies benefited from exposure to Asia and Eastern Europe, rising by 0.34% for the month, with these partially offset by declines in Latin American exposure. Fundamental Value strategies declined -0.40% from weakness in the US large cap and global equities.

The HFRI Relative Value (Total) Index posted a decline of 0.01% for the month, with positive contributions from fixed income exposure and multi-strategy credit funds, which were only partially offset by declines in yield alternative and convertible arbitrage strategies. The HFRI RV: Multi-Strategy Index gained 0.07% on falling yields, while widening credit spreads contributed to mixed performance across convertible arbitrage managers, with the HFRI RV: Convertible Arbitrage Index declining 0.80% for the period.

The HFRI Emerging Markets Index rose by 0.71% for the month, with positive contributions from exposure to Emerging Asia, Russia and multiple Emerging Markets offsetting declines in Latin America  and the Middle East. The HFRI Fund of Hedge Funds Index posted a gain of 0.65%, in line with the performance of single manager strategies.