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From Kirsten Bischoff, Opalesque New York:

With estimated gains of +1.67% in July (Dow Jones Credit Suisse Hedge Fund Index), the hedge fund industry is within striking distance of pre-2008 high water marks. 

Hedge fund participation in the 2009 market rally allowed the industry to recoup almost 77% of the losses from the 2008 drawdown.  However, performance in 2010 has been anything but a steady climb and by the end of the first half of 2010 the team at Credit Suisse estimated that funds had only managed to eke out another 3% of gains to reach previous peak levels, bringing them to 80% of lasses recouped.

Now, the gains made in July, will bring funds within 2.23% of full recovery to previous peak performance levels.  Compared to the current -24% drawdown for the Dow Jones Global Index (counting the +7.90% gain in July), hedge funds continue to remind investors of their asset protection abilities, participating in market upticks and protecting on the downside.

It is a reminder that many managers will hope to have a chance to prove again during August as we lead up to the next redemption deadline (Quarterly +30 days).  With a slip back into net outflows during July (following poor May and June performance), investors may have been telling managers that absolute returns are the performance expectation, and capital protection is not enough. ......................

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