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Hedge fund returns dip negative in July, but just barely; India funds soar while China funds see a reversal of fortune

Thursday, August 12, 2021
Opalesque Industry Update - The global hedge fund business' average return dipped negative in July, but just slightly, to -0.32, according to the just-released eVestment July 2021 hedge fund performance data. This marked the first month of industry-wide average negative returns in 2021. Just over 51% of funds reporting to eVestment were in positive territory for the month, however, and year to date (YTD) industry performance is still in the green at +8.89%.

"Looking at the groups of positive returns and negative returns, the issue in July wasn't that losses were large during the month: average loss of -2.51% has been surpassed several times in the last year," said eVestment Global Head of Research Peter Laurelli. "Rather the average gain was very low at +1.77%. That is the lowest average gain in over two years, since July 2019."

Among primary strategies eVestment tracks, Managed Futures funds were the big performance winners in July, with average performance of +1.00%. This puts Managed Futures funds at +8.23% average returns YTD.

"The differing results between macro and managed futures strategies in July was remarkable given they tend to operate in generally similar markets in aggregate," said Laurelli. While Managed Futures funds were positive for the month, Macro funds had negative average returns of -0.60%. "The return differences in favor of Managed Futures funds was evident not only among the broad samples, but also within the 10 largest reporting products. For the year so far, the largest Managed Futures funds are outpacing the largest Macro funds +10.26% to +1.60%, respectively."

Other interesting points in the new data include:

• Event Driven-Activist funds dipped into negative average return territory in July, at -0.20%, but at +24.43% average returns YTD, they are by far the strongest performers among the primary strategies eVestment tracks. Distressed funds - also negative last month with average returns of -0.17%. - were a distant 2nd for YTD returns among primary strategies at +12.66%.

• Among primary hedge fund markets eVestment tracks, Commodities funds had a similar story. These funds were just barely positive in July, with average returns of +0.15% but YTD are seeing strong average returns of +15.56%.

• India-focused hedge funds are leading the hedge fund industry with monthly average returns of +7.49% in July and YTD average returns of +36.67%. This builds on India-focused funds' strong performance of +19.91% in 2020.

• On the other hand, China-focused hedge funds are seeing a reversal of fortune, with July average returns at -4.74% and YTD average returns at just +0.24%. This is a stark contrast to past years: China-focused funds returned an average of +34.71% in 2020 and +22.75% in 2019.

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