Although they outperformed the broader market, July was a second tough month at the office for Australian hedge fund managers. Based on 70% of the funds that have reported to date, the average fund lost -1.41% compared with the ASX 200 which fell -2.13%. This follows from May’s negative results when the average fund lost -0.68% compared with the ASX 200 which fell -2.38%.
At one stage the ASX200 was down around 6%, before a rally and some year end window dressing left the market looking much more respectable than it really was. Downward pressure from the Euro zone debt crisis, a weak (or no) recovery in the US coupled with the potential for a default and ratings downgrade, and ongoing uncertainty on China’s economic sustainability were mostly to blame. However local issues including weakness in consumer and business confidence, ongoing housing and mortgage debt concerns, and political uncertainty as a result of the proposed Carbon Tax all added to the toll.
While no manager ever likes to see negative numbers, these results show funds provide less volatility and provide some capital protection in negative markets.
The news was not universally poor as 70% of funds outperformed the ASX in June, and 83% have done so year-to-date, with the same percentage having provided positive returns over the past 12 months. As usual some of the best managers provided great results, with Bennelong Long/Short returning over 4% for the month, and emerging manager Evergreen up by 1.4% as they celebrated their first year’s history with a 12 month return of 50.57%.
