Hedge funds struggling in June

Hedge funds continued to struggle in June as volatile market movements created a difficult trading environment, according to a commentary from Man Group plc, a London-based alternatives investment management firm.

Equity hedged styles were again broadly negative. The HFRI Equity Hedge Index fell -1.2% as managers who reduced net and gross exposures to protect capital were unable to fully participate in the late June rally.

Those with a short bias posted the largest gains (HFRI Short Bias Index up 4.2%). In European equities, those exposed to Financials like Lloyds and Barclays fared worst, but funds with a higher weighting of Consumer Discretionary stocks helped protect returns as the sector rallied 1.7%.

According to the analysis, upward trends shown in managed futures over the first three weeks of June reversed in the final week of the month, leading the Newedge CTA Index down -1.7%.

June was another challenging month for commodities investors, as crude, precious metals, and some agricultural products fell on both fundamental and technical signals.

Long energy and agricultural positions suffered, particularly following the International Energy Agency announcement that it had released strategic oil reserves for only the third time since 1975 to offset supply constraints in Libya. And a huge sell off in agricultural products led corn down -15.9% and wheat -25.2%, and overall the S&P GSCI Index fell -5.3%.

Relative value strategies finished the month fairly flat as the HFRI Relative Value Index dropped -0.1%. Convertible bond arbitrageurs were generally the worst performers within the style (HFRI Convertible Arbitrage Index down -1.0%), while managers with high levels of underlying equity short hedging performed better.

Event-driven strategies continued to post negative returns with the HFRI Event Driven Index falling -1.1% on the back of poor performance in both equity and credit markets. Distressed managers tended to suffer across all asset classes, but merger arbitrage specialists outperformed within the style (HFRI Merger Arbitrage Index down -1.3%), although some may have been hurt in July with the high profile breakdown of News Corp’s bid for BskyB.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.