Early estimates indicate the Credit Suisse/Tremont Hedge Fund Index (Broad Index) will finish up +1.68% in August (based on 54% of assets reporting).
It is estimated that hedge funds, as represented by the Broad Index, will finish up 1.68% for August. This will mark the sixth straight month of positive performance for the overall asset class. Managers saw a wide dispersion in returns across global equity markets last month with the Shanghai equity markets closing down over 20% and certain US and European markets peaking mid-month, reaching their highest levels since October 2008.
Amidst the market volatility, managers with net short portfolios appeared to perform better in August than they have during previous months of the rally. In Japan, markets rose modestly following the countrys national election and Japan-focused Long/Short Equity hedge funds were up approximately +1% for the month on average, benefiting primarily from stock selection and outperformed by the small-cap sector of the equity markets. As a whole, Long/Short Equity managers had a generally positive month, finishing up an estimated 1.42%, while Emerging Markets returned an estimated 2.18%.
Event Driven managers returned approximately +2.46% for the month as managers continued to take advantage of tailwinds in equity and credit markets in the distressed environment. The majority of investment opportunities in the space currently appear to coming from the special situations area.
Managed Futures posted returns of 0.79%, representing their second positive month of performance so far this year (the sector was up +0.85% in May). Many managers in the strategy have struggled for most of this year, although trend followers appear to be beginning to show profits as models gain more traction. The Global Macro sector also experienced positive returns in August, posting a +0.94% gain as commodities-focused managers capitalized on rallies in metals, sugar and certain other softs.
Convertible Arbitrage extended its run of positive performance to eight consecutive months, finishing up 3.37% in August, as opportunities in the space remained strong. Performance was muted, however, in comparison to returns of the past four months, when the strategy posted consecutive monthly returns of greater than 4%.The US Federal Reserve and US Treasury announced an extension of its $200 billion term asset-backed securities loan facility (TALF) program, adding an additional three to six months from its original end-of-year expiration date. This was welcome news to many fixed income investors and relative value managers who had an overall positive month. Fixed Income Arbitrage managers are now up 2.39% year to date.
Estimates are based on 54% of assets reporting; final August performance will be published September 15th on Bloomberg and online at www.hedgeindex.com. For a complete description of the Credit Suisse/Tremont Hedge Fund Index, please see the index rules available at www.hedgeindex.com.