Hedge Funds Outperform Major Indices in July

However, the hedge funds still outperformed most major indices, which reported less than stellar returns.

Top Notch

The month’s top performing strategy proved to be distressed securities, the average US hedge fund using this strategy increasing by 1.7% over the month and year to date gains reaching 14.1%. Offshore funds faired similarly well with this strategy, increasing 1.2% over the month and 11.3% year to date.

July’s lackluster equity market proved a boon to short sellers, who borrow stock from brokers and sell it hoping for a price fall before the loan comes due, US hedge fund short sellers experienced increases of 5% in July and 6.1% year to date, while their offshore counterparts returned 3.3% over the month and 8.1% year to date.

Macro strategies provided the worst returns in July, with returns of minus 3.5% in US hedge funds, followed by US aggressive growth strategy funds, which fell by 2.7% over the month and raking up losses of minus 7.1% in total this year.

Year-To-Date

Nevertheless, despite the losses taken by hedge funds in July, the asset class has still outperformed the major indices on a year-to-date basis, the Average US Hedge Fund and the Average Offshore Hedge Fund returning 2.9% and 2.2% respectively, net of fees.

Over the month corporate profit warnings, rising unemployment and slowing economic growth dampened investor sentiment in the equity markets. Though roughly half the hedge funds in Van’s database suffered losses, most managed to hold onto the gains made in previous months.

Figures are based on information received from the hedge funds in the group’s databases.