The Eurekahedge Hedge Fund Index was down 1.95% in August, but still managed to outperform global markets by 5.30% as the MSCI World Index fell 7.25% in a highly volatile environment.
These sentiments were the result of the debt situation in Europe, a bleak outlook on global economic growth and the downgrade of US government debt by Standard and Poors.
Despite overall losses, macro hedge funds gained 1.12% in August as diversified portfolios provided both downside protection and profit-making opportunities to the managers. While global markets changed directions frequently during the month, hedge funds were able to deliver the 5.30% outperformance (compared to the MSCI World Index) as gains on the short side offset losses. Protective positions in safe haven assets also helped to prevent heavy losses. Arbitrage, distressed debt, event driven, long/short equity and relative funds witnessed their fourth consecutive month of negative returns.
Latin American hedge funds delivered the best performance in terms of regional mandates, ending the month with positive, albeit marginal, returns of 0.09%. The MSCI Latin America was down 3.56% for the month of August. Latin American managers have delivered excellent downside protection throughout 2011, with the August year-to-date return standing at 2.48%. Comparatively the MSCI Latin American Index is down 15.26% so far in 2011. Multi-strategy managers, who make up nearly half of the Latin American hedge fund space, were cumulatively up 0.72% in August, as exposure across different asset classes proved profitable.
All other regional mandates finished the month with negative returnsthough overall managers were able to outperform underlying markets across the board. Japanese hedge funds were down 1.38%, beating the Nikkei 225 by nearly 8% during August. Asia ex-Japan, European and North American managers outperformed their respective underlying markets by 3.17%, 5.82% and 3.46%, respectively.
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