The Van Global Hedge Fund Index (“VGHFI” or the “Index”)
gained 1.9% net of fees in July, led by strong performance in the equity long/short
strategy group, according to hedge fund index provider Van Money Manager Research,
LLC (VAN).
July was the best month of the year for the industry with surging global equity
markets providing long-biased managers in the Long/Short Equity Group with an
attractive investment environment. Convertible arbitrageurs likewise benefited
from a good environment as credit spreads tightened, new issues increased, and
volatility rose in select names due to earnings announcements.
“The purported demise of hedge fund returns now seems exaggerated”
noted Kevin Campbell, Vice President of VAN.
“Over the past one-, two- and three-year periods, the Index has gained
approximately 10%, 20% and 35%, respectively. Although the S&P 500, a standard
benchmark for investors, has achieved higher returns over these periods (14%,
29%, and 43%, respectively), its annualized standard deviation is more than
three times that of the VGHFI over this three-year period, 13.1% for the S&P
500 versus 4.2% for the Index, illustrating the benefits that hedge funds offer
to investors," Mr Campbell added.
Eighteen of VAN’s twenty individual hedge fund strategy or sub-strategy
indices rose in July, led by Opportunistic (4.2%) and Aggressive Growth (4.0%).
These strategies took advantage of the rise in equity markets, particularly
in the small cap growth sector. As expected in this environment, the Van Global
Short Selling Index was the worst performing index last month, losing 3.2%.
The Van Global Market Neutral Arbitrage Index had its best gain in two-and-a-half
years, rising 1.6%. This was largely a result of the positive environment for
convertible arbitrage described above. These managers, which represented approximately
35% of the Market Neutral Arbitrage managers that reported in time for the calculation
of the Index, gained on average 2.0% net in July.
For comparison purposes, the U.S. equity markets performed well with the S&P
500, Dow Jones Industrial Average, Nasdaq, and Russell 2000 gaining 3.7%, 3.7%,
6.2%, and 6.3%, respectively. The global equity markets performed equally well
with the Morgan Stanley Capital International World Equity Index, the Nikkei
225 and the Dow Jones Europe Stoxx Index gaining 3.4%, 2.7% and 3.7%, respectively.
In this environment, fixed income markets did not perform as well. The Lehman
Brothers Aggregate Bond Index declined 0.9%.
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