The Van Global Hedge Fund Index remained flat in August according to hedge fund consultant Van Hedge Fund Advisors International.
The Index – the average performance for the month, net of fees, of over 800 hedge funds – has gained 1.3% net for the year to date. The Van Global Hedge Fund Index returned 0.0% net in August when excluding the performance of Funds of Funds. The Van U.S. Hedge Fund Index, which includes only U.S.-domiciled funds, gained 0.1% net, while the Van Offshore Hedge Fund Index, which includes only non-U.S.-domiciled funds, fell -0.1% net for the month.
Hedge funds had a mixed month in August, with about 59% of funds in the Van Global Hedge Fund Index reporting a positive return. The Index stayed flat in August, outperforming some broad market indicators but lagging others. Rising oil prices were a drag on equities for much of the month.
The large-cap S&P 500 ended the month up 0.4% but the NASDAQ and small-cap Russell 2000 posted losses of -2.5% and -0.5%, respectively. Looking abroad, the MSCI World Equity Index rose 0.3% while the Dow Jones Europe Stoxx 50 gained 0.4%. None of the Global long/short equity hedge fund strategies that were tracked averaged a positive return in August. Bonds, on the other hand, fared well, with the Lehman Brothers Aggregate Bond Index rising 1.9%. All of the hedge fund strategies that focus primarily on fixed income investments posted a gain last month.
The Van Global Hedge Fund Index’s 1.3% net year-to-date gain surpasses the major stock market benchmarks, including the S&P 500, MSCI World Equity Index and Dow Jones Europe Stoxx 50, which have returned 0.4%, -0.6%, and -4.5%, respectively. The Lehman Brothers Aggregate Bond Index, however, has returned 3.1% so far this year. Two of VAN’s four broad global strategy group indices were positive in August, while two posted losses. The Specialty Strategies Group, comprised of niche strategies such as Short Selling, Emerging Markets, and Income, averaged a 0.9% net gain. The Market Neutral Group scored its sixth positive month this year with a 0.3% net gain.
However, the Long/Short Equity Group, which represents the largest segment of the hedge fund universe, followed its July loss with a -0.3% net return in August. The Directional Trading Group fared worst, losing -0.7% net last month.
In August, seven of the fifteen individual global hedge fund strategies were positive, two were flat and six were negative. For the second month in a row, Short Selling had the highest return, gaining 1.4% in August. Emerging Markets and Income followed with average net returns of 1.3% and 1.1%, respectively. The worst performing strategy last month was Macro, down -1.0% net. Macro strategy funds often make directional bets on various commodities and economic sectors; shifting oil prices in August may have contributed to their losses. Futures and Aggressive Growth each sustained a loss of -0.7% net.
VAN also calculates four sub-strategy indices within the Market Neutral Arbitrage strategy. Convertible Arbitrage performed best in August, gaining 0.5% net. Fixed Income Arbitrage was also profitable, averaging a 0.2% net return. Merger Arbitrage and Statistical Arbitrage, however, were both losers in August, falling -0.1% net and -0.2% net, respectively.
Ten Global hedge fund strategies have generated net gains for the year to date. Distressed Securities has amassed the largest gain, 9.1% net, followed by Short Selling and Income, up 4.9% net and 4.6% net, respectively. Aggressive Growth and Futures tie for the worst performing strategy so far this year with losses of -4.7% net.