A Solid Month For Most Hedge Funds

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June was another good month for hedge funds, although not as good as May. The Eurekahedge Hedge Fund Index gained 1.38% in June as the global equity market drove gains among hedge funds. However, hedge funds underperformed the MSCI ACWI IMI, which was up 2.7% for June. The tech-heavy NASDAQ was up 4.05% in June, while the S&P 500 gained 0.87%.

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According to Eurekahedge, final asset flow numbers for May reveal performance-based gains of $27.3 billion and $300 million in inflows. Performance in June was still positive, but not as good as May. Preliminary June numbers reveal performance-based gains of $2.2 billion and investor outflows of $6.6 billion. About 69% of the fund managers who report to Eurekahedge had positive returns last month, while 16% of them maintained double-digit returns in the first six months of the year.

As of the end of June, the hedge fund industry had $2.1 trillion in assets under management. For the first half of the year, the industry racked up $105.5 billion in performance-driven declines and endured a staggering $92.6 billion in investor redemptions.

After June’s gain, the Eurekahedge Hedge Fund Index is still in the red for the year. The index is down 1.28% for the first six months of the year. The world’s hedge funds are still trying to regain what they lost during the first quarter amid a rebound in risk assets. They’re still doing better than global equities, however. The MSCI AC World Index is down 7.02% for the first half of the year.

China leads the way

As far as geographic regions, China was the best-performing geographic mandate for hedge funds in June. The Eurekahedge Greater China Long Short Equities Hedge Fund Index gained 5.94% during the month, pulling its return for the first half of the year to 6.45%. Asian funds as a whole recorded performance-driven gains of $2.9 billion and investor outflows of $400 million last month.

The Eurekahedge North America Long Short Equities Hedge Fund Index also had a solid month in June as it gained 1.93% amid strong performances among U.S. equities. North American funds as a whole had a more difficult month, however.

All North American funds saw performance-driven losses of $3 billion in June. For the first six months of the year, North American fund managers have recorded performance-driven losses of $84.6 billion. Investor redemptions have also remained high at $56.2 billion for the first half of the year.

European funds did well last month with $1.7 billion in performance-based gains and investor inflows of $100 million. Year to date, European hedge funds have racked up $16.3 billion in performance-based losses and $26.3 billion in investor redemptions.

Strongest and weakest strategies

Multi-strategy funds were up 2.42% in June, while long/ short equities funds were up 2.21%, and fixed-income funds gained 2%.

Allocations to various strategies were mixed during June even though risk assets did well during the month. Macro hedge funds recorded the best performance-based gains at $900 million, although the strategy also saw $400 million in investor redemptions. Fixed-income funds recorded $800 million in performance-based gains and inflows of $500 million in June.

Long/ short equity funds have had a difficult year so far with $34.7 billion in investor redemptions for the first six months and $48.2 billion in performance-driven losses. Arbitrage, relative value and event-driven funds have all recorded investor inflows for the first six months of the year. Arbitrage funds saw $1.2 billion in inflows, while relative value funds captured $400 million in inflows, and event-driven funds recorded $100 million in inflows.

This article first appeared on ValueWalk Premium.

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