July Not So Bad, Index Says

Aug 7 2007 | 11:36am ET

The early numbers are in, and they indicate that July might not be quite the across-the-board bloodbath for hedge funds that the headlines about sub-prime and stock woes might imply.

Only three of the six Dow Jones Hedge Fund Indexes were in the red last month, though that was enough to make it the weakest month of the year. Unsurprisingly, distressed securities funds “led” the losers in July, but they fell only 1.82% on the month, and are still up 4.75% year-to-date, good for fourth-best among the DJ indices. It didn’t even have as bad a month as the Standard & Poor’s 500, which fell 3.13% in July. Joining it on the wrong side were event-driven (down 1.12% in July, up 5.71% YTD) and equity market-neutral (down 0.48%, up 1.96% YTD).

On the bright side, merger arbitrage led the way, returning 2.45% in July to take the lead among the half-dozen strategies for the year at 13.27%, nudging out equity long/short, which returned 0.58% (11.93% YTD). Convertible arbitrage also had a positive month, rising 0.26% (2.67% YTD).

Other early numbers are not so rosy: Hedge Fund Research told Reuters that its HFRX investable funds index fell a whopping 3.01% in the week ended July 27, a week in which such hedge fund giants as the Man Group’s AHL strategy and Goldman Sachs’ Global Alpha fund posted big losses. In fairness, it’s not even the HFRX index’s worst week of the year—that honor goes to the week ended March 2, when it tumbled 3.36%. Other HFRX numbers were not yet available, Reuters reports.

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