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Macro hedge funds lead broad based July gains

Tuesday, August 07, 2012
Opalesque Industry Update: Hedge funds posted gains for the second consecutive month in July as Macro CTA managers captured strong trending dynamics across multiple asset classes, pushing the HFRI Macro: Systematic Diversified Index to a gain of +2.8 percent, according to data released today by HFR, the global leader in the indexation and analysis of the global hedge fund industry.

The HFRI Fund Weighted Composite gained +1.1 percent in July, the strongest monthly performance since February, with positive contributions from Relative Value Arbitrage (RVA), Equity Hedge (EH) and Event Driven (ED) strategies complementing the Macro gains. The HFRI Emerging Markets Index gained +1.1 percent, also the strongest month since February, while the HFRI Fund of Funds Index advanced +0.7 percent, ending three consecutive months of declines.

Macro hedge funds benefitted from volatility and strong trending behavior across multiple asset classes in July, with the HFRI Macro Index posting a gain of +1.9 percent. On significant positive contributions from agricultural and metals exposures, commodity-focused strategies gained nearly +2.0 percent for the month. Currency-focused funds also posted gains, with many funds having reduced profitable short Euro positions in recent weeks, moderating aggregate industry short Euro exposure. Falling yields and spread tightening benefitted both Relative Value Arbitrage and Macro strategies, with the HFRI RVA Index gaining +1.5 percent in July, bringing YTD performance to +5.8 percent, the strongest area of industry performance. Fixed income-based RVA performance was also driven by strong sub-strategy gains across Asset-Backed and Yield Alternatives exposures, with these gaining +2.3 and +2.5 percent, respectively.

The HFRI Equity Hedge Index gained +0.6 percent in July, led by contributions from Quantitative Directional and Energy/Basic Materials funds, with these gaining +1.7 and +2.1 percent, respectively. Event Driven strategies also posted positive performance for the month, with M&A and credit market tightening contributing to the HFRI Event Driven Index advancing +0.3 percent in July.

“Investor sentiment shifted in a fluid and dynamic manner throughout the month, with financial markets discounting not only the latest European sovereign debt crisis developments, but also mixed data and outlook for U.S. and China growth, and the impact of the evolving LIBOR investigation.” stated Kenneth J. Heinz, President of HFR. “Hedge funds gained traction through this environment with a strong contribution from Systematic Macro and Arbitrage executing on quantitative trend-following and fundamental mean-reverting components of their respective strategies. As this challenging Macro environment continues to evolve, hedge funds are well positioned to capitalize on new opportunities which develop.”


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