All hedge fund strategies except convertible arbitrage, emerging markets, event-driven and fixed income arbitrage posted negative performance in June, according to a report by Lipper.
All hedge fund strategies except convertible arbitrage, emerging markets, event-driven and fixed income arbitrage posted negative performance in June, according to a report by Lipper.
Credit-focused and arbitrage managers outperformed directional and event-driven strategies.
Confirming the positive trend of the previous two months, the best performing hedge fund strategy was convertible arbitrage, returning 0.28 per cent, while the worst performing strategy was managed futures at -1.59 per cent.
After topping the performance league table in both April and May, long only ended in negative territory at -0.10 per cent, while the runner-up in May-emerging markets-was flat at the end of June.
After posting three consecutive monthly gains global stock markets dropped 0.41 per cent in June, according to the MSCI World TR Index, while the US market returned a modest 0.20 per cent as reflected in the S&P500 TR Index reading.
Developed markets declined slightly in June as the S&P Global BMI Index closed at -0.47 per cent. There were a few bright spots though, with Australia (+4.51 per cent) ranking at the top of the developed countries performance league table.
After enjoying double-digit returns since February 2009, emerging markets-especially BRIC members-performed relatively poorly across the regions at the end of June. Funds overweighted in Russia equities dropped drastically as Russia’s economy was hit hard by the global financial crisis-in line with the World Bank’s predictions for 2009 that the economy is likely to contract 7.9 per cent and the jobless rate to rise to 13 per cent.
Compared with other regions, Asia-focused funds performed relatively better as Thailand (up 8.56 per cent) and Indonesia (up 5.45 per cent) outperformed. China (+3.48 per cent) maintained its positive momentum despite the impact of the global slowdown, while India dropped significantly-from 37.70 per cent for May to -2.17 per cent for June.
Long only and long/short equity funds focusing on US companies gained slightly during the month, benefiting from style investing and sector exposure to information technology (+4.03) and utilities (+5.11 per cent), while the decline in May’s outperforming sectors, i.e., energy and financials, weighed on portfolio performance.
Small-cap stocks beat large- and mid-cap stocks, and growth stocks outperformed value stocks during the month.
Convertibles continued to offer attractive yield, and convertible arbitrage managers delivered positive returns as market volatility further declined during the month (-20.77 per cent for May and -8.89 per cent for June), credit risk spreads moved along a tightening pattern, and US stock market prices trended higher.
Event-driven managers also performed well, particularly in the distressed securities space. Risk arbitrage managers were buoyed by rosy expectations on mergers in the third and fourth quarters as June witnessed the second highest number of global rights issues and the second highest value after those of May. Europe rights issue deals increased both in terms of volume and value, while US transactions dropped; however, the value of deals was up compared to the previous month.
Commodities registered negative returns for June (the Reuters/Jefferies CRB Index declined 1.22 per cent month on month) as gains in industrial metals and energy were offset by large losses in agricultural, soft commodities, and precious metals. Crude oil and aluminum continued to surge, while gold and silver dropped considerably.
In the FX market the US dollar made a comeback in June, moving along an appreciation pattern against main developed market currencies as disappointing macro data curbed hopes of an impending economic recovery, triggering safe-haven currency drivers. Despite mixed economic data from the region, Central Europe’s currencies-namely the Czech koruna, Hungarian forint, and Polish zloty-rallied at the end of the month as improving economic sentiment buoyed appetites for riskier emerging market assets.
