Hedge Funds Down In June As Long/Short Take Beating

Jul 6 2010 | 12:35pm ET

Hedge funds seemed to wilt a little in the June heat, one industry index shows.

The Credit Suisse Liquid Alternative Beta Index shed 0.4% last month. The decline, following a 2.64% loss in May, leaves the index down 0.12% on the year.

Despite dipping into the red for the first half, Jordan Drachman, head of research for alternative beta strategies, said there was room for optimism.

“Despite overall negative performance, three out of four LAB sector indices posted gains as managers utilized a number of diverse strategies which generated positive returns across currency and credit markets,” Drachman explained.

None more so than merger arbitrage: The strategy soared 2.15% last month, more than doubling its year-to-date return to 4.04%. Event-driven and global macro funds also posted positive returns, edging up 0.41% (1.64% year-to-date) and 0.14% (down 0.54% YTD), respectively.

So why the negative June?

“Long/short equity appeared to be the largest detractor last month as managers in the space continued to suffer from equity market volatility,” Drachman said. Indeed, the strategy shed 1.94% on the month, pushing it and the overall index into negative territory, down 1.21% through the first half.

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