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Equity Hedge funds had the strongest contribution to overall industry performance, with the HFRI Equity Hedge Index gaining +1.2 percent for the month. Gains were broad-based across the strategy, with Quantitative Directional, Fundamental Value and Fundamental Growth all gaining between +1.25 and +1.6 percent. Other EH strategies had positive contributions to August gains, with Equity Market Neutral, Energy and Technology-focused funds gaining between +0.6 and +1.2 percent; Short Bias funds detracted from performance. Event Driven funds posted gains similar to those of Equity Hedge, with the HFRI Event Driven Index gaining +1.1 percent. ED gains were led by the equity-sensitive Special Situations and credit-sensitive Distressed sub-strategies, with both gaining over +1.0 percent in August.

Fixed income-based Relative Value Arbitrage posted a gain despite rising yields, with spread tightening and effective hedging contributing to the HFRI Relative Value Index gaining +0.9 percent; the August gain is the 8th in the last 9 months and RVA has posted positive performance in 37 of 44 months since December 2008. Relative Value sub-strategies of Volatility, Yield Alternatives and Asset-Backed had significant contributions to RVA performance. Macro hedge funds posted a decline for the month, partially offsetting strong July performance, with the HFRI Macro Index declining by -0.16 percent. Macro performance also reflected dispersion across various sub-strategies; the HFRI Macro: Systematic Diversified/CTA Index declined by -0.9 percent and Currency strategies declined by -0.6 percent on the Euro advance; however, Macro Discretionary strategies gained over +1.0 percent while Commodity funds gained +1.9 percent.

Fund of Funds advanced for the 2nd consecutive month, with the HFRI Fund of Funds Composite Index gaining +0.64 percent in August. Emerging Markets hedge funds also had positive contribution to industry performance, with the HFRI Emerging Markets Index gaining +1.06 percent.

"Hedge funds were tactically positioned for the equity, fixed income and commodity developments in August, with many funds having strategically increased equity net exposure, reduced short Euro currency positions and appropriately hedged fixed income exposure through mid-summer," stated Kenneth J. Heinz, President of HFR. "While funds remain cognizant of the potential for an adverse market reaction in the ongoing European banking and sovereign debt crisis, recent developments have been constructive. As a result, hedge funds have modified defensive positioning to consider a continuum of positive and negative scenarios, increased optionality and volatility implications of the Euro sovereign debt crisis, as well as a broadening of focus to include the US elections and Chinese growth considerations."

HFR

Press Release

BM