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European debt problems are major determinant of hedge fund performance in 2012

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Hedge funds gained 0.66 per cent in June, according to the Barclay Hedge Fund Index compiled by BarclayHedge.

The index is up 2.39 per cent year to date.

“A bailout package for Spain announced early in the month helped to set a more positive tone for equity markets in June,” says Sol Waksman, founder and president of BarclayHedge. “The ECB’s month-end agreement to make loans directly to eurozone banks added fuel to the rally and propelled the S&P 500 to its largest single day gain this year, demonstrating yet again that Europe’s financial woes continue to be a major determinant of hedge fund and equity market performance.”

The Barclay Hedge Fund Index has gained ground in four of the first six months of 2012, mirroring the largely positive performance of equity markets.

“Each time that sentiment regarding Europe turns more negative, hedge funds have a down month as investors move into risk-off mode and sell equities,” says Waksman.

Overall, 13 of Barclay’s 18 hedge fund indices had positive returns in June. The Healthcare & Biotechnology Index gained 2.57 per cent, Equity Long Bias was up 1.63 per cent, Merger Arbitrage gained 0.69 per cent, the Convertible Arbitrage Index rose 0.66 per cent, and Pacific Rim Equities added 0.62 per cent.

On the losing side, the Barclay Equity Short Bias Index dropped 1.95 per cent in June, following a 9.03 per cent gain in May. The Technology Index was down 0.52 per cent in June.

After two quarters in 2012, healthcare and biotechnology leads all hedge fund strategies with an 8.86 per cent cumulative gain. Convertible arbitrage is up 5.06 per cent, equity long bias has gained 4.39 per cent, and fixed income arbitrage is up 4.39 per cent.

The Equity Short Bias Index is the only losing hedge fund strategy in 2012, and is down 9.80 per cent year to date.

The Barclay Fund of Funds Index lost 0.49 per cent in June, but remains up 0.94 per cent in 2012.

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