Hedgies’ June Swoon

Hedgies’ June Swoon

Hedge funds took it on the chin last month, sucker punched by Fed fears. Jawboning by Chairman Ben Bernanke of a slowdown in the Federal Reserve’s bond buying program spooked the equity, credit and commodities markets, cutting into the year-to-date gains scored by many funds.

According to data from Hedge Fund Research, the average hedge fund gained 3.4 percent in the first half of 2013, compared to a 12.6 percent rise in the S&P 500.

Data for June shows across-the-board losses in all hedge fund categories, though debits in absolute return strategies were barely perceptible. Equity hedge funds took the biggest hits, dropping 1.9 percent on weakness in the emerging market and small cap sectors. The S&P 500 lost 1.5 percent in June.

There was no cover provided by diversification last month. Multi-strategy funds, drubbed by shortfalls in commodity and credit strategies, slumped 1.7 percent. Event driven portfolios lost 1.1 percent, largely because of poor performance in the distressed securities and special situation sectors. Merger arbitrage strategies gave up only 0.2 percent.

Fixed income funds and macro portfolios both pulled back 0.7 percent in June. Macro managers were hurt most by exposure to multi-strategy and emerging markets exposure. Widespread spikes in rates across the yield curve and widening spreads hurt fixed income managers, with only modest relief provided by the Japanese and emerging market credit markets. 

Market neutral funds posted a decline of 0.6 percent while convertible arbitrage portfolios gave up 0.5 percent in June.


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