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Distressed and Merger Opportunities Lead Index Gains

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NEW YORK (–Most hedge fund strategies were positive net of fees in June, and although some returns were meager, the overall picture is in line with what hedge fund managers have been experiencing over the last year or two.

Convertible arbitrage, equity market neutral, event-driven and merger arbitrage returned less than 1% last month, while distressed securities and equity long/short funds lost 0.20% and 1.51% respectively over the same time frame.

Still, hedge fund investors might be pleased to note that every one of the six Dow Jones hedge fund benchmark indexes is in positive territory for the year through June, and five out of six recorded gains in the second quarter.

Only equity long/short had a sharp decline with a dip of 3.29% during the quarter, losing more than half of its first quarter gains. This could be due to long/short equity funds’ propensity to have a long bias. The Dow Jones Wilshire 5000 index, a broad U.S. equity index, was down 1.96% over the same time frame. Long/short equity is still up 2.19% for the year through June.

Distressed securities funds are so far the winning strategies of this year; they are up 7.21% for the year to date, with roughly equal gains of a little more than 3% in each quarter. Event-driven managers are seeing success, with a gain of 5.3% so far this year.

In the same vein, merger arbitrage players have gained 4.97%, as mergers and acquisitions increase worldwide. Merger arbitrage was the top-performing strategy last month, picking up 0.99%.

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Contact Bob Keane with questions or comments at [email protected].


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