Opalesque Industry Update -
Concerns about the Euro-centric sovereign bond crisis persisted through the month of June, but global financial markets were also impacted by concerns about slowing rate of economic growth in China and data suggesting a slower rate of economic recovery in US consumer, housing and manufacturing sectors. Volatility increased broadly across financial markets, global equity markets retraced to recent low, US bond yields fell precipitously and the HFRX Global Hedge Fund Index declined by -0.94% for the month of June, bringing the YTD 2010 performance to -1.20%. |
The weakest area of hedge fund industry performance was Equity Hedge strategies, with the HFRX Equity Hedge Index declining by -1.38% in June. All EH sub-strategies posted declines for June, with the most significant weakness in Fundamental Growth strategies, which declined by -2.85% for the month. Fundamental Value strategies posted more modest declines, with these posting a loss of -0.65%, while Equity Market Neutral declined by -0.77% in June, maintaining a gain of +1.93% for the 1H10.
Partially offsetting weakness in Equity Hedge, the HFRX Relative Value Arbitrage Index posted a gain of +0.29%, adding to the YTD gains to post a +1.29% gain for 1H10. Credit-focused Convertible Arbitrage and RV: Multi-Strategies were positioned for the financial market volatility and falling US yields which ensued in June, with both posting small gains in June to add to YTD gains; with each of these gaining +1.92% and +3.23% for 1H10, respectively.
The HFRX Macro Index posted a decline of -1.32%; as with the previous month, losses in fundamental, discretionary Macro strategies offset gains in Systematic trend following strategies. In total, Macro strategies have declined by -2.32% in 1H10 but the diversified, quantitative, systematic, trend-following funds gained +0.64% in June, with long positions in developed market fixed income offset weakness in currencies & commodities. Similar to the Financial Crisis of 2008, Systematic Macro strategies are the top areas of industry performance in 1H10, posting a gain of +4.53%.
The HFRX Event Driven Index posted a decline of -0.53% on corporate credit weakness, slowing M&A environment, increasing risk aversion and widening deal spreads, bringing 1H10 performance to -0.73%. The weakest area of ED performance was Distressed strategies, which declined by -3.73%, paring 1H10 gains to +0.38%. Merger Arbitrage and Special Situations funds posted declines of -0.58% and -0.48% in June to pare 1H10 performance in each of these to +0.13% and +0.03%, respectively.
Comments reference performance figures as posted on July 2, 2010.