Investable Hedge Fund Index Slips
Monday, August 02, 2010

The Greenwich Composite Investable Hedge Fund Index fell 0.85% during June as equity markets traded lower in volatile trading, Greenwich Alternative Investments has announced.

Seven of nine Greenwich Investable Indices moved lower on the month, although most declines were less than 1%. The Greenwich Arbitrage Investable Index was the best performer in June, gaining 59 basis points. The Long-Short Equity Investable Index lost 1.42%, less than half the loss experienced by the S&P 500 and the MSCI World Equity Index. Year-to-date, Fixed Income strategies lead other Investable Index strategies, with Event-Driven, Long-Short Credit, and Arbitrage Indices gaining 5.11%, 2.77%, and 3.39%, respectively.

“The last week in June turned an otherwise profitable month on average into a slight loss for most funds," noted Clint Binkley, Senior Vice President.

"Global equity markets are still struggling to find direction as economic forecasters offer mixed signals. Equity based hedge funds have little other choice but to keep net exposures relatively low and wait for more opportunistic conditions. In this type of scenario, arbitrage and market neutral hedge fund strategies really begin to prove their worth,” he added.

Hedge funds lost 0.96% in June according to the Barclay Hedge Fund Index compiled by BarclayHedge. The Index is now up 0.13% year-to-date.

All but five of Barclay’s hedge fund indexes lost ground in June. The Barclay Equity Long Bias Index fell 2.95%, Healthcare and Biotechnology lost 2.62%, the Technology Index was down 2.22%, Equity Long/Short lost 1.78%, and Pacific Rim Equities were down 1.52%.

“Fears of a ‘double-dip’ recession helped drive equity markets lower for a second month,” says Sol Waksman, founder and president of BarclayHedge.

Four hedge fund strategies performed well in June. The Barclay Equity Short Bias Index jumped 4.08%, Fixed Income Arbitrage was up 0.75%, Merger Arbitrage gained 0.60% and the Convertible Arbitrage Index rose 0.31%.

“On the other side of the flight to quality trade, prices for US 10-year Treasuries rose two percent in June as risk-adverse traders sold stocks and then bought bonds with the proceeds,” says Waksman.

The two best performing hedge fund sectors in 2010 are the Distressed Securities Index, up 6.26% after two quarters, and the Fixed Income Arbitrage Index which has gained 5.53%.

“The ongoing rally in bond markets has been the ‘wind behind the sails’ for sectors that are interest rate sensitive,” says Waksman.

The Barclay Fund of Funds Index lost 0.74% in June, and is down 1.34% year-to-date.