A Solid Month For Most Hedge Funds
June was another good month for hedge funds, although not as good as May. The Eurekahedge Hedge Fund Index gained 1.38% in June as the global equity market drove gains among hedge funds. However, hedge funds underperformed the MSCI ACWI IMI, which was up 2.7% for June. The tech-heavy NASDAQ was up 4.05% in June, while the S&P 500 gained 0.87%.
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According to Eurekahedge, final asset flow numbers for May reveal performance-based gains of $27.3 billion and $300 million in inflows. Performance in June was still positive, but not as good as May. Preliminary June numbers reveal performance-based gains of $2.2 billion and investor outflows of $6.6 billion. About 69% of the fund managers who report to Eurekahedge had positive returns last month, while 16% of them maintained double-digit returns in the first six months of the year.
Seth Klarman’s Baupost recorded “strong” gains for the second quarter, although precise numbers were not included in the July 23 letter to investors, which was reviewed by ValueWalk. Klarman said that during the first quarter, they were “substantial purchasers of securities,” while during the second, they were “significant net sellers” due to the strong rally. Read More
As of the end of June, the hedge fund industry had $2.1 trillion in assets under management. For the first half of the year, the industry racked up $105.5 billion in performance-driven declines and endured a staggering $92.6 billion in investor redemptions.
After June’s gain, the Eurekahedge Hedge Fund Index is still in the red for the year. The index is down 1.28% for the first six months of the year. The world’s hedge funds are still trying to regain what they lost during the first quarter amid a rebound in risk assets. They’re still doing better than global equities, however. The MSCI AC World Index is down 7.02% for the first half of the year.
China leads the way
As far as geographic regions, China was the best-performing geographic mandate for hedge funds in June. The Eurekahedge Greater China Long Short Equities Hedge Fund Index gained 5.94% during the month, pulling its return for the first half of the year to 6.45%. Asian funds as a whole recorded performance-driven gains of $2.9 billion and investor outflows of $400 million last month.
The Eurekahedge North America Long Short Equities Hedge Fund Index also had a solid month in June as it gained 1.93% amid strong performances among U.S. equities. North American funds as a whole had a more difficult month, however.
All North American funds saw performance-driven losses of $3 billion in June. For the first six months of the year, North American fund managers have recorded performance-driven losses of $84.6 billion. Investor redemptions have also remained high at $56.2 billion for the first half of the year.
European funds did well last month with $1.7 billion in performance-based gains and investor inflows of $100 million. Year to date, European hedge funds have racked up $16.3 billion in performance-based losses and $26.3 billion in investor redemptions.
Strongest and weakest strategies
Multi-strategy funds were up 2.42% in June, while long/ short equities funds were up 2.21%, and fixed-income funds gained 2%.
Allocations to various strategies were mixed during June even though risk assets did well during the month. Macro hedge funds recorded the best performance-based gains at $900 million, although the strategy also saw $400 million in investor redemptions. Fixed-income funds recorded $800 million in performance-based gains and inflows of $500 million in June.
Long/ short equity funds have had a difficult year so far with $34.7 billion in investor redemptions for the first six months and $48.2 billion in performance-driven losses. Arbitrage, relative value and event-driven funds have all recorded investor inflows for the first six months of the year. Arbitrage funds saw $1.2 billion in inflows, while relative value funds captured $400 million in inflows, and event-driven funds recorded $100 million in inflows.
This article first appeared on ValueWalk Premium.