The Hennessee Hedge Fund Index added 0.97% in August, bringing its year-to-date gains to 3.82%.
Hedge funds continue to underperform the S&P 500, which was up 1.98% on the month and has racked up YTD gains of 11.85%.
That said, most of the strategies and regions tracked by Hennessee ended August in positive territory, with equity long/short funds up 1.04% in August (3.75% YTD), arbitrage/event-driven funds up 1.05% (5.30% YTD) and global/macro funds up 0.78% (2.12% YTD).
European funds added 1.55% for the month and are up 3.07% YTD; Latin American funds added 1.39% in August, and are up 5.31% YTD; emerging markets funds added 1.07% in August but are down 0.95% YTD.
The only red ink in this month’s report was generated by short bias funds (down 2.80% on the month and 9.51% YTD) and Asia Pacific funds (down 0.87% on the month and 1.64% YTD).
“Hedge funds benefited from the rally in risk assets, as many funds strategically increased net exposure in July,” said Charles Gradante, managing principal of Hennessee Group. “While hedge funds are mindful of risks related to the ongoing European banking and sovereign debt crisis, they have become more comfortable with the short-term outlook and have increased their risk tolerance.
“Hedge funds continue to learn a hard lesson,” added Gradante. “‘Don't fight the Fed… Regardless of Fundamentals’ should be the bumper sticker for this market. Sitting in cash, being defensive and waiting for the other shoe to drop has been a poor strategy during the last 12 months.”