BarclayHedge Index Up 3.11% In July

Aug 18 2009 | 4:47am ET

Hedge funds rose 3.11% in July, their fifth consecutive month of gains, according to BarclayHedge.

The Barclay Hedge Fund Index has returned 16.23% during its winning streak, and is now up in excess of 14% on the year. Convertible arbitrage funds remained hot, adding 6.99% on the month to reach 35.38% on the year, by far the best performance of 2009 to date. Emerging markets funds also did extremely well, returning 5.52% in July (28.23% year-to-date), as did equity long-bias (5.34% in July, 18.37% YTD) and event-driven (4.46%, 18.37% YTD).

Funds of hedge funds rose a more modest 1.51% on the month (5.84% YTD).

All told, 16 of the 18 BarclayHedge indices were in the black last month.

“During July, we continued to see improving liquidity, a tightening of credit spreads and a decrease in risk-aversion among investors,” BarclayHedge founder Sol Waksman said. “These trends provided support for a continuation of the rallies in global equity and credit markets.”

Equity short-bias funds lost a lot of ground in July, no surprise given the market rally that swamped even the best hedge fund strategies of the month. Short-sellers lost 8.08%, extending their year-to-date losses to 13.22%. Equity market-neutral funds were also burned by the hot stock market and shed 0.14% (down 0.67% YTD).

Still, the outlook is bright for an industry facing a bleak future just months ago.

“If current trends continue, most of last year’s losses will soon be recouped by diversified hedge fund investors who stayed the course,” Waksman said.

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