Sunny outlook for hedge funds in July
All market segments were up in July, extending a positive trend started last month and hedge fund strategies exposed to the equity risk factor logically benefited from the market environment.
But according to Edhec Risk’s Alternative Indexes, they captured less than half of its return due to rather low dynamic exposure: equity market neutral (0.35 per cent), event driven (0.59 per cent) and long/short equity (0.43 per cent).
The latter category, although more directional in nature, seems to have been negatively impacted by a bias towards small-caps, which underperformed by 2.16 per cent.
Convertible arbitrage returned 0.90 per cent, exhibiting some alpha in excess of its risk-drivers-induced performance. The CTA global strategy (3.05 per cent) showed another one of the wild swings which has characterised its track record since the beginning of the year, the largest part of it being idiosyncratic (in excess of just one per cent stemming from an exposure to bonds and commodities).
Funds of funds, with all the underlying strategies showing gains, recorded its best performance since February (0.72 per cent).