Morningstar Monthly Index Finds Hedge Fund Performance Up, Asset Flows Down

The Morningstar MSCI Composite Hedge Fund Index increased 1.1% in July led by equity gains, while funds had net outflows of over $851 million in June.

The index, composed of nearly 1,000 hedge funds, bounced back from a negative performance in June and is now up 4% year-to-date. And despite June’s outflows, net asset flows are up over $1.3 billion this year.

Strategy-wise, the Morningstar MSCI Equity Index fared the best, gaining 2.5% for the month and reaching over 8% for year-to-date gains. In contrast, short-bias strategies fared the worst, falling over 3% and down over 17% year-to-date.

Growth in emerging markets is still slow, but the strategy did see an uptick in July, rising almost 0.7%. Meanwhile, the unhedged MSCI Emerging Markets Index, gained 1.0% in July, but this index is down 8.6% so far this year, while the Morningstar MSCI Emerging Markets Index is up nearly 2.7% year-to-date.

Regionally, the Morningstar MSCI North America Hedge Fund Index had the highest increase at 2.5%, leading all other world regions for the second month in a row. U.S. stock market gains also helped the Morningstar MSCI Small Cap Hedge Fund Index, which primarily represents small-cap equity strategies in the U.S., have the best month of any of Morningstar’s indexes with a 3.3% gain in July. This increase pushed the small cap index up 12.0% year-to-date.

However, these hedge fund indexes did not keep pace with the S&P 500, which gained over 5%, and the Russell 2000, which rose 7% in July.