Hedge Funds Return to Positive Territory in July

Date: Monday, August 19, 2013
Author: Graeme Terry, Preqin

Hedge funds bounced back in July after June saw the industry in the red for the first time after a 12-month positive streak. Preqin’s preliminary benchmarks indicate that single-manger hedge funds are once again in positive territory in July, posting 1.64% across all strategies and regions and bringing the year-to-date return to 5.39%. Returns are providing cause for optimism as the last 12 months have aggregated an average of 11.04% for hedge funds compared to 0.03% for the same period last year. All major hedge fund strategies returned gains for July and Preqin’s event driven benchmark continues to lead the way, with monthly returns of 2.06% taking year-to-date returns to 9.06%. Long/short strategies followed narrowly behind with 2.05% returns in July, taking year-to-date performance slightly above the overall hedge fund benchmark at 6.25%. Multi-strategy funds posted 1.50% for the month and macro-strategies continued to lag behind other strategies with July returns of 0.62%.

Hedge funds focused on North America enjoyed a particularly encouraging month, generating on average 2.72%, and the region is now outperforming all other regions in 2013 with 9.53% year-to-date returns. Europe was the second top-performing region in July posting 1.89%. Funds targeting Asia-Pacific returned 1.84% in July compared to a loss of 2.23% in June and the region is still outperforming all other regions for the past 12 months with an average return of 18.31%. Funds focusing on emerging markets gained 0.92% in July after suffering a heavy loss of 3.37% in June.
Funds of hedge funds continue to produce dampened returns compared to the overall hedge fund benchmarks. Preqin’s early benchmarks reveal that funds of hedge funds gained 0.88% in July and these funds have generated 3.86% year-to-date. Long/short multi-manager hedge funds contributed significantly to the funds of hedge funds benchmark posting 1.70% for July, outperforming multi-strategy funds which gained 0.61%.

UCITS funds reporting to Preqin posted their highest monthly return since January this year, with a preliminary July figure of 1.52% taking year-to-date returns to 2.88%. Like the hedge fund benchmarks, UCITS funds ended a 12 month positive streak last month, but have once again returned positive figures for July across all strategies and regions. Long/short strategies outperformed other UCITS strategies for this month posting 2.50%, whereas relative value and macro strategies generated smaller gains of 0.23% and 0.73% respectively.

While other fund types saw improvements in July, Preqin’s preliminary benchmark saw CTAs continue to struggle with these funds suffering their third consecutive negative month, posting an average loss of 0.75%. Although this was an improvement on June which saw a loss of 1.59%, CTAs have returned a disappointing -5.16% over the last 12 months. Not all CTAs suffered losses, however, as Preqin’s early benchmark reports that CTA funds with a North America focus posted a gain of 1.35% in July, the first month of positive performance for these funds since January.