• / Free eNewsletters & Magazine
  • / My Account

Related Content

  1. Videos
  2. Articles
  1. Only a Haircut Will Do in Europe

    While liquidity may provide temporary relief, only debt reduction--and a creditor haircut--will put Europe back on the road to growth, says TCW's Komal Sri-Kumar.

  2. Going Against the Grain in Hedge Fund Replication

    Ramius' Vikas Kapoor discusses some of the drawbacks of common replication strategies and how his fund strives to avoid them while still providing the liquidity often absent in regular hedge funds.

  3. Don't Pay Alpha Fees for Beta Performance

    Hedge fund-replicating ETFs and mutual funds can provide investors with similar return characteristics at a much lower cost, says Index IQ's Adam Patti.

  4. Making Room

    Google and Berkshire made room for new strategies, while others got some room to maneuver this week, reports Morningstar markets editor Jeremy Glaser.

July Hedge Fund Review

Hedge funds weathered through a volatile July.

Terry Tian, 08/22/2012

The Morningstar MSCI Composite Hedge Fund Index, an asset-weighted composite of nearly 1,000 hedge funds in the Morningstar Hedge Fund database, was up 1.9% in July, bringing the index's year-to-date return to 3.7%. Most hedge funds successfully weathered through a volatile July, beating the broad stock market indexes. Managed futures and currency strategies delivered particularly strong performance. 

Managed futures strategies were some of the biggest winners in July, as the Midwest's worst drought in 25 years resulted in strong and persistent upward trends in major agriculture commodities, such as soybeans, wheat and corn. The Morningstar MSCI Systematic Trading Hedge Fund Index, which includes managed futures funds, jumped 4.3% in July, bringing its year-to-date return to 2.7%.

Currency hedge funds benefited from their short positions on the Euro. Despite a late month rebound, the Euro depreciated substantially against the U.S. dollar throughout July, reaching a two-year low. The Morningstar MSCI Currencies Hedge Fund Index rose 3.9% in July, making it one of the best performing indexes for the month.

Unlike currency or commodity markets, the U.S. and the European stock markets were directionless until the president of European Central Bank vowed to do ‘whatever it takes’ to save the Euro on the 25th. The late month rally drove the S&P 500 TR Index and the MSCI Europe NR Stock Index into the black, rising 1.4% and 1.1%, respectively. North America and Europe focused hedge funds underperformed the stock markets due to their short positions – the Morningstar MSCI North America Hedge Fund Index and the Morningstar MSCI Europe Hedge Fund Index returned 0.4% and 0.2%, respectively.

Small capitalization stocks underperformed large capitalization equities in July, as evidenced by the 1.4% decline of the Russell 2000 TR Index. The Morningstar MSCI Small Cap Hedge Fund Index was one of the few hedge fund indexes that posted a negative return this month – dropping 0.8%.

In June, single-manager hedge funds and funds of hedge funds in Morningstar's Hedge Fund Database leaked $4.4 billion and $2.1 billion, respectively. The Europe long/short equity category experienced the heaviest redemptions among all single-manager categories, bleeding $1.8 billion. The long/short debt and diversified arbitrage categories received inflows of $277 million and $105 million, respectively.

1
Terry Tian is an alternative investments analyst at Morningstar.
blog comments powered by Disqus
Upcoming Events
Conferences

©2014 Morningstar Advisor. All right reserved.