NEW YORK (HedgeWorld.com)–Hedge funds returned a mediocre 0.51% in August, according to the S&P Hedge Fund Index.

August’s limp returns put the S&P Hedge Fund Index at a still-respectable 6.86% for the year, though. Hedge funds are not keeping pace with U.S. equity markets, with the S&P 500 stock index returning 1.79% in August and 14.57% year-to-date through August.

Despite strong performance from the component S&P Directional/Tactical Index, overall returns were dragged down by a negative month for arbitrage funds. The Directional/Tactical Index, composed of long/short equity, global macro and futures funds, returned 1.69% in August and was up a solid 8.58% year-to-date through August.

Meanwhile, the S&P Arbitrage Index returned negative 0.84% in August and was up just 0.95% in the first eight months of the year. The S&P Arbitrage index includes equity market neutral, fixed-income arb and convertible arb funds.

The S&P Event-Driven Index, made up of merger arbitrage, distressed securities and special situation funds, returned 0.59% in August and was up a significant 11.04% this year through August.

A separate but related index, the S&P Managed Futures Index, returned 1.24% in August in a bit of a comeback and was up 5.69% year-to-date through August.

PBarr@HedgeWorld.com