Hedge Funds Extend Performance Streak in July

Emerging markets record their strongest gain this year, HFR says

Hedge funds recorded their strongest performance since January, led by equity hedge, technology, health care and emerging markets, Hedge Fund Research reported this week.

The HFRI Fund Weighted Composite Index gained 1.2%, the ninth consecutive monthly gain and the 16th in the trailing 17 months, bringing year-to-date performance to 4.8%.

The emerging markets (total) sub-index shot up by 3.6% in July, the strongest monthly gain in 16 months. Emerging markets are up 13.5% for the year. Latin America was the top regional performer, returning 6.1%. Asia ex-Japan leads all regions for the year to date, up 19.5%.

The equity hedge (total) sub-index advanced 1.7% in July, raising performance so far this year to 7.7%. HFR noted that this surpasses equity hedge's full-year returns in each of the prior three calendar years.

Technology and fundamental growth provided the strongest contributions to equity hedge performance in July, both gaining 2.3%. For the year to July, health care is the leading equity hedge sub-strategy in terms of performance, up 12%.

Event-driven strategies, led by special situations and distressed exposures, posted their 13th consecutive monthly performance gain in July, up 0.9%. Event-driven is up 5.1% for the year.

Fixed-income based relative value arbitrage strategies have now gone 17 consecutive months without posting a loss. In July, the relative value (total) sub-index rose by 0.6%, led by exposures to corporate and high-yield bonds, as well as to real estate and energy infrastructure partnerships, according to HFR.

Macro strategies also moved ahead in July, up 0.8%, reversing from a June decline. The systematic diversified/CTA index added 1.1% to performance.

HFR reported that total hedge fund assets increased to $3.1 trillion at the end of the first half, as the industry experienced net capital inflows for first time since the third quarter of 2015.

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