Hedge funds had yet another month of gains in June, as the composite Eurekahedge Hedge Fund Index advanced 1.8 percent. This was despite increased volatility and resurfacing inflation fears in the underlying markets, which in turn pushed long-term yields up (10-year yields to 5.03 percent).
However, higher interest rates put pressure on equities as hopes of the Fed immediately easing rates dissipated and were quickly replaced with the likelihood of no action or even potential tightening. As a result, equities too underperformed during the month.
Continuous outflow of funds from credit-centric Europe into volatility-centric Asia caused the Eurekahedge European Hedge Fund Index to rise a mere 0.7 percent as Asian implied volatility was in demand. Needless to say, Asia-focused funds did well. Among other geographies, emerging markets fared extremely well, with gains in excess of 3 percent for the month.
From an investment strategy point of view, CTA/managed futures led the way thanks to a surge in oil prices. Macro funds too, along with multi-strategy and long/short equities, contributed to the notable rise of the composite Eurekahedge Hedge Fund Index.