Hedge funds post modest gains, trailing stock market

Date: Tuesday, July 10, 2012
Author: Melvin Backman, Reuters

Hedge fund performance once again trailed the stock market in June, continuing a pattern for the year.

In June, the average hedge fund posted a meager 0.05 percent gain, according to the broadest industry index maintained by Hedge Fund Research Inc.

For the first six-months of the year, the HFR index rose 1.7 percent, the Chicago-based hedge fund tracking firm said Monday.

By comparison, the benchmark S&P 500 stock index rose 4.12 percent in June and was up 9.48 percent as of June 30.

Kenneth Heinz, HFR's president, said the $2.13 trillion hedge fund industry's returns affected by a "combination of slowing global growth" and fallout from the European financial crisis.

But this year hasn't been lackluster for all types of hedge funds.

HFR reported that fixed-income hedge funds and relative value funds both bested the low benchmark as measured by the broad industry index. In the first half of 2012, fixed-income hedge funds were up 7.24 percent and relative value funds rose 4.31 percent.

For instance, Fortress Investment Group on Monday released performance numbers for its Drawbridge credit fund, which showed the fund was up 6.24 percent through May.

Equity-focused stock funds were up 2.09 for the first half of year.

Funds that have a "short" bias on the markets were some of the biggest losers, falling 3 percent in June and down 8.29 percent for the years.

Also, so-called macro-oriented hedge funds were poor performers, falling 1.62 percent in June and ending the first half of the year up just 0.65 percent.

Despite the relatively small gains for the industry, June saw 304 hedge funds opening. The figure represents the most hedge fund openings since the fourth quarter of 2007.

"Innovative hedge funds are launching and finding opportunities as large financial institutions look to de-emphasize trading activities as a result of anticipated regulation," said Heinz, the HFR president.