Hedge funds in the Eurekahedge fund index are up 1.15% in July, the first month since February to have positive gains.
In June, Eurekahedge said funds in its index had been underperforming the equities markets for four months, the longest losing streak since 2008, while J.P. Morgan posted a cautious 0.05% gain for their indexed funds. The second quarter was down by 2.3%, Eurekahedge said, making it the worst Q2 on record for the industry.
The second quarter performance is a continuation of the trend of 2011, Ken Heinz, CEO of Hedge Fund Research, told Global Custodian recently, pointing to the performance drop in the second half of that year. The primary driver of financial market performance is the sovereign debt crisis, he says, but because of the fragmented nature of the crisis, it is becoming very difficult to predict the outcome of hedge fund strategies. The environment right now being as unprecedented and fluid as it is, awaiting the resolution of the crisis, no one is exactly sure how its going to play out.
The lack of certainty was not stopping capital inflow, however. Hedge fund capital reached $2.13 trillion in the first quarter of 2012, a number not seen since 2007, and even as $39 billion flowed out in the second quarter as a result of market uncertainty, $43 billion flowed in.
In the first quarter this year, 232 funds liquidated, a two-year record since the 240 liquidations in the first quarter of 2010, according to Hedge Fund Research, while 304 new funds launched, a number not seen since the fourth quarter of 2007.
In a recent report, Eurekahedge said funds with a track record of a year or less were flat in 2011, which was a poor year, while funds with a lifespan of five years or greater were down 7% on average, suggesting that newer funds are outperforming their established counterparts.
Overall hedge fund performance in 2011 was negative 3.57%, while year-to-date performance in 2012 is 2.62%.
(OS)