Hedge Funds Fall In June, Indices Show

Jul 9 2008 | 2:00am ET

Hedge funds took a step back to end the second quarter, with three major indices showing losses in June after two consecutive months of gains.

Greenwich Alternative Investments’ Greenwich Global Hedge Fund Index dropped 0.42% in June to return to the red year-to-date, down 0.1%, while Hedge Fund Research’s HFRI Fund Weighted Composite Index declined 0.68% (down 0.75% YTD). But experts insist that the news is not all bad.

“The downside protection that characterizes hedge funds is clearly evident this year with long-only equity indices experiencing losses of 10% or more,” Margaret Gilbert of Greenwich AI noted. Indeed, the Standard & Poor’s 500 suffered an 8.48% drop last month, and is down 12.19% on the year.

Dow Jones said that event-driven funds fell by 2.8% in June, wiping out its year-to-date returns and leaving it down 0.01% in the first half. Distressed securities and merger arbitrage also posted losses, dropping 1.36% (down 5.11% YTD) and 1.03% (up 0.4% YTD), respectively.

Greenwich said that long/short equity funds lost 1.3% (down 2.08% YTD), especially value funds, which fell 2.34% (down 3.3% YTD). Emerging markets funds also continued their downward spiral, falling 3.62% (down 7.28% YTD).

Likewise, HFRI’s biggest losers were emerging markets funds. Last year’s high-flyers continued their sharp decline on the year, falling 3.42% overall (down 6.74% YTD), with Asia ex-Japan funds remaining the year’s worst-performer after shedding a further 5.57% (down 14.16% YTD).

Other decliners in the HFRI indices were fixed-income convertible arbitrage funds (down 3.51% in June, down 7.62% YTD), quantitative funds (down 2.56%, down 3.25% YTD), technology and health care funds (down 2.52%, down 3.35% YTD), equity hedge funds (down 1.85%, down 3.31% YTD), event-driven funds (down 1.01%, down 1.91% YTD) and relative value funds (down 0.5%, down 1.22% YTD).

Not all hedge funds were in the red in June. Equity market neutral, futures, macro and especially short-selling funds enjoyed a successful month, according to the indices. Short-sellers posted a 9.39% gain betting against the falling equities markets, according to Greenwich AI, while HFR said they rose 8.6% (up 12.2% YTD).

Funds of hedge funds fared no better than their single-manager compatriots: The HFRI Fund of Funds Composite Index fell 0.72% on the month (down 2.29% YTD) and the Greenwich Composite Investable Index fell 0.38% (down 0.1% YTD).

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